IIPM set to beat economic slowdown
On the other hand, while the automobile sector is hit by a major roadblock; the performance of Hero Honda is indeed incredible. Of course, they owe this to their incredible brand name and strategy of cashing in on the rural riches. The ‘bottom of the pyramid’ unquestionably helped them beat the slowdown and post reasonably good profits. The pharma sector was not much impacted by the economic slowdown and Glaxosmithkline Pharmaceutical (GSK) and Zandu Pharmaceutical (Zandu) continued with their superb performances.
Meanwhile, it is worth pondering over the reasons as to why and how these stocks managed to outperform the benchmark indices. The sustenance of India’s structural growth and the consumption theory gels well with the results. It is no wonder that neither of these stocks mirrored the inherent overall weakness and fragility in the markets. Speaking to 4Ps B&M, Jagannadham Thunuguntla, Equity Head SMC Capitals Ltd, explains, “FMCG and healthcare are defensive sectors wherein there is stability and continuity in terms of performance. Moreover these sectors to a large extent are recession proof.” Perhaps this is why these companies are sitting on surplus cash and investments.
Well this is not all for 2008; the service sector which accounts for more than half of India’s GDP continued to expand at an impressive pace during the September ‘08 quarter. Activity in trade, hotels, transport and communications again rose at a double-digit rate. Meanwhile, despite a global financial storm, India’s finance, insurance and real estate sector reported a stunning 9.2% expansion as gross fixed capital formation was buoyant during the quarter. As the inflationary pressure moderated (thanks to softening of demand and falling commodity prices) and the interventions of the central bank came at the right moments the markets did respond to it warmheartedly. The year end saw the stock markets recovering and inching closer to the 10K mark. Perhaps that’s why they say, ‘all is well that ends well’.
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Source : IIPM Editorial, 2009
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
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