StatsGuru-26-August-2013

Decoding stock market signals to pick winners

Although the stock market has taken something of a beating since the US' central bank announced it would withdraw its monetary stimulus, many believe this is the time to find and pick stocks with potential. Business Standard has examined some of the largest sectors by market capitalisation and companies that are doing well by sectoral benchmarks on various indicators. Table 1 shows price-earning ratios for selected sectors. The entire automobile sector has a fairly low P/E, but even within that, TVS Motors has a very low ratio. Similarly, in steel, some Jindal-owned companies have low P/E ratios. Table 2 shows sales growth. Fast-moving consumer goods have seen good growth but P&G Hygiene has had standout growth even within the sector. Mahindra & Mahindra has more than twice the sales growth of the sector on average. Table 3 shows profit growth, negative for many sectors. But Escorts and Maruti buck the trend for automakers, and Havells India has grown profits at 20 per cent while the capital goods sector saw a reduction of 47 per cent in profits. Table 4 shows costs as a percentage of sales. Britannia and Bajaj have shown even FMCG companies can cut slack. Finally, as the rupee depreciates, Table 5 looks at the proportion of companies' forex earnings. In capital goods, Alstom India and, in auto, Bajaj, are poised to see a currency-based boost to revenue. (Click here for table)