Q3 Results: A Mixed Bag

There are two ways of looking at the market. One, the orthodox way, which says that it will always follow the fundamentals, and two, no matter what the fundamentals, the markets will always do what a majority of the participants feel is correct. If you look at the way the equity markets are behaving today, the latter seems to describe its character more accurately. It is latching on to even the smallest positive news in an effort to emerge from any pessimism that envelopes it. I am sure you would have noticed the disquiet on the indices when the GDP growth forecast for FY13 was brought down to just around five per cent. However, some days down the line, the markets changed course to move up in a big way on the news that the investor sentiment in Germany, as measured by the ZEW economic expectations index, was getting stronger. The index had gone up by 16.7 points to clock a reading of 48.2 in February, against expectations of coming in at 35 points.

The point that I am trying to make here is that optimism is far overshadowing the pessimism in the markets today. The bulls have been trying to seize the smallest of opportunities to maul the bears and bound ahead. 2013 has begun in right earnest and looks promising for the markets. While this is true of the markets globally, it is even more pertinent in the case of India. The government, after having lagged for a better part of its current tenure, woke up to unleash a spate of reforms. Over the recent past, it has tried to keep up the pace and its intentions look well founded. The markets have reacted rather well to these efforts, which have been further complemented by the RBI in terms of cutting rates and bringing down the key reserve ratios.

Apart from this, the corporate results for the December quarter have been the real trigger for the markets over the past month or so. In fact, it is the one big factor that maps the markets’ future roadmap. How have the various sectors performed? Which companies have done well and which are the ones to have faltered on the growth front? Is Corporate India growing at a meaningful pace? All these are questions that drive the markets into the future.

Our cover story in this issue looks at the performance of Corporate India for the December 2012 quarter. Our research and editorial team minutely dissects the corporate results of over 2100 listed entities comprising mainly the ‘A’ and ‘B’ Group companies to evaluate their performance. The aggregation of this analysis culminates into how the important sectors fared during the period. Dalal Street Investment Journal issues that cover the corporate results have therefore turned out to be collectors’ issues over the years. We have looked at 10 primary sectors that form the core of the Indian economy. Their good performance or otherwise always leads to proper conclusions as to where the economy is headed and also about the broader direction of the markets.

Sugar stocks were the darling of the market at one point of time. They fell from glory and have taken a lot of time to make a comeback. In fact, they are still languishing. Will the decontrol of ‘levy sugar’ pave the way for their return to glory? We have tried to understand this in the current issue. Alongwith is also another special report on a rather ambitious scheme – the Rajiv Gandhi Equity Savings Scheme (RGESS) – that was announced in the Union Budget last year by the then Finance Minister, Pranab Mukherjee. We had touched upon this in a small way in our cover story of the preceding issue. Now that the scheme is being sold by the government in a big way to the markets, here are details on why the scheme is likely to be a damp squib rather than a blockbuster.

As usual, we recommend two stocks in our two recommendation sections, Low Priced Scrip and Choice Scrip). Incidentally, both our picks for this issue – Essar Oil and Cairn India – are from the Oil & Gas sector. They operate in two distinct segments of the Oil & Gas sector and have their own sets of strengths, which will see their stocks perform well and deliver good value over time.

The budget is around the corner. By the time I key in my next edit, it would already have made the headlines. The Finance Minister has a big task cut out for himself while presenting this year’s budget. We are hopeful that Chidambaram will deliver on expectations. But while the expectations are high, let us not forget that fiscal prudence has to precede political compulsions if the nation has to march ahead in a meaningful manner.

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