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Ideas for the Runaway Market

A lowdown on the state of the major sectors & why you should not get carried away with all the brouhaha that market experts would like to sell to you

The markets have had a wonderful year in 2014. The Sensex gained close to 30 per cent. The broad-based BSE 500 did even better, netting gains of 35 per cent. The future appears hunky-dory for Indian stock markets. Except, that is far from reality.

Forget the global scare from the collapse of the rouble, the fall in crude or even the depreciation of the rupee, the Indian stock markets are hiding a dirty little secret - all is not well. Five out of nine sectors--capital goods, FMCG, metals and mining, power and real estate--have reported flat or negative bottomline growth in the last 12 months. That is more than half of India Inc's industries seeing no growth in earnings.

What this also means is that the state of India Inc. has not improved much in the eight months after the new government was sworn in. While one could argue that it is too early yet, it doesn't change the fact that the markets have run far ahead. The capital goods index for instance, trades at a P/E of 33x. This valuation for a sector that is the worst performer with nil topline and nil bottomline growth cannot be justified. In this cover story we bring you the lowdown on the state of the major sectors and why you should not get carried away with all the noise and the brouhaha that market experts would like to sell to you.

Aggregate numbers for BSE 500 Net earnings drag even as revenue growth slows down for a number of sectors

Sector Growth YOYOper Profit Growth YoYPAT Growth YoYTTM EPS (G) YoYP/E
Capital Goods-0.03-0.12-0.1-0.127.78
FMCG12.478.110.80.842
Cement4.37-0.66.936.9324.52
Pharma13.1922.497.827.8227
Auto10.5315.716.2316.2326.95
Tech15.8811.2714.514.2518.54
Metals and mining109.16-15.52-15.5212.54
Power13.121.39-0.36-10.7711.51
Real Estate4.144.65-19.21-19.323.89
Median10.538.110.80.824.52

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