January 27, 2005

Quarterly results season is upon us

Initial analysis shows good performance from major companies. Major companies continue to do well. The profit growth is good. Return on capital is good. This is inspite of supply side inflation due to rising oil and commodity prices, high competition.

The market at 6500 does not look too expensive , provided corporate india is able maintain its return on capital (read efficiency), inflation remains moderate and the goverment doesnt do something stupid.

Most of the news channel / website are talking of record highs in the stock market. This is clearly rear mirror view. The absolute level of the stock market does not matter. The current levels should be analysed keeping in mind the following factors

1) return on capital for corporate india - currently 20% plus
2) inflation - moderate inspite of oil prices
3) robust demand

All in all the overall corporate performance gives me confidence to hold on to my positions , maybe add to a few too

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