Stock Shastra

The first month of the new year 2012 has been very good for the stock markets. The month of January saw the Nifty go up by 12.4% – the best monthly returns over the last 30 months! This rise has been fueled to a large extent by FIIs who were net buyers of more than Rs. 26,000 Cr. The month also saw many companies announce their December i.e. 3rd quarter financial results. Out of the BSE 500 companies as many as 212 companies have announced their results so far.
Let’s take a look at the report card for the December quarter and what it reveals:
The 212 companies which have reported their results so far (till 1st Feb’12) have clocked a healthy growth of 26.8% in Net Sales as compared to December 2010 figures. However, this growth hasn’t resulted into increased profitability as higher inflation and high interest costs have reduced operating [...]

The Financial Year 2012 saw negative news continue to pour in for the market. Since the 19,000 level seen in March, Sensex has dropped more than 10% over the last two and a half months. The factors leading to this fall include inflation, rising interest rates and weak global cues. Inflation has been one of the key concerns for the Indian companies affecting earnings in the previous quarters. To tame the inflation, the RBI has continued tightening the monetary policy by rising interest rates.

So, how have the Sensex companies performed on the earnings side for the March quarter? And most importantly what action should you take considering the Sensex@MRP?

The New Year has not started on a good note for the Bulls. Since the 20,000 level seen in December, Sensex has dropped more than 2000 points over the last 2 months. The factors leading to this fall include the deluge of scams that have cast a shadow on the governance issues in the country and fears of high inflation affecting the profitability of India Inc.

So, how have the Sensex companies performed on the earnings side for the December quarter? And most importantly what action should you take considering the Sensex@MRP?

I earlier shared my views on how to look around us for great investment worthy companies. Spotting a great company is just the first step. We also need to make sure that the company we are going to invest in is also fundamentally very strong. Before I delve into to this topic, let me share a very basic fact with all of you.
How do we make profits when we invest in a company?

Price appreciation
Dividends

Let’s take the first and the primary reason why we can profit from investing in stocks. A stocks price can rise for two reasons:

Speculation in the short term
Company performs well

We have no control over speculation. It is highly risky and a short term phenomenon, whereas in the long run, what matters is a company’s Performance. Thus, if and only if a company performs well, will the markets pay a higher amount for it. This is where the [...]