BSE Sensex Stock analysis & their earning outlook

The BSE Sensex 30 Stock Index represents the Indian stock market and containes some of the biggest corporate names from all major sectors of the Indian Economy. The BSE Sensex stocks are all fundamentally strong and give a good investment opportunity after the recent stock market carnage. However in the near term some of these stocks will dissapoint with their earnings and hence investment decision needs to be taken accordingly. Presented below is a chart for the BSE 30 Stocks and what can one expect from them in terms of earnings.

What The Colors Represent


Where Earnings Will Dissapoint:

• The metal and mining sector will be hit the most as the global slowdown which is turning out to be a sharp one will lead to a much lower demand for industrial commodities. Thus lower prices and lower margins will be seen in these sectors.

• The housing related sector will also see a sharp downward revision in earnings. This is main because loans will be harder to get and the speculative money is out of real estate now. Also funding big projects will be an issue.

Which Sectors can give Positive Surprises:

• The FMCG sector can spring some positive surprises and the latest results of HUL suggest the same. The FMCG goods should not see big demand destruction. There is also a huge untapped market in this sector and thus it should keep growing.

Why IT Sector Outlook is still Uncertain:

• This is because the BFSI sector is one of the major clients for the Indian IT companies. The recent carnage in the financial sector has still not shown its effect on the IT sector but can play a major role in big earnings downgrades in the months to come. So its a sector to just stay out of and watch.

Has the Sensex discounted all the Earnings downgrade Factors:

• The markets and some stocks in the Sensex are trading at very cheap levels at current PE. But one needs to consider the forward EPS and hence forward PE to determine if the Sensex is actually trading at very cheap levels. However, for now the markets are surely trading at oversold levels.

Conclusions:

• Many Sectors representing the BSE Sensex will see earnings downgrades. The slow earnings can be for most of 2009 and even in 2010 depending on how the global situation changes. So one can easily expect that the markets would not make major moves in the next 1-2 years.

The stock markets usually bottom out before the economy does. So hopefully it has reached close to its bottom and unless the financial crisis worsens we should not see a very big downside from here. Another 5-10% downside however is very much on the cards. But being oversold there might be some relief rally.