StatsGuru-1-April-2013

The story for stocks in 2012-13

How have the Indian markets done in the just-concluded financial year, and are shares priced attractively at the moment? As Table 1 shows, the Indian indices have not exactly outperformed their peers in 2012-13. In fact, they've been beaten by most developing-world markets - though returns in the Shanghai market continue to be sluggish. More interestingly, as Table 2 shows, gains in the Indian market are concentrated among larger companies; small- and medium-capitalisation companies have seen their shares take a beating. The slowdown in manufacturing in the larger economy is reflected in the sectoral movement of share prices, as well. Capital goods, power, and metals are the three sectors which have seen their share prices dive the most. On the other hand, consumer-facing and services industries - defensive sectors like fast-moving consumer goods and health care as well as information technology - have seen their prices go up the most.

What of price-earnings ratios? According to Table 3, the Indian markets are in the 14-15 range, which many analysts would claim is underpriced for a developing economy. The US, German and French markets are in the same range - which has worrying implications if global investors suddenly tack on a risk premium to portfolio investments in India. Of course, as Table 4 shows, smaller companies are also much cheaper companies in terms of their price-earnings ratio. And, as Table 4 also shows, defensive sectors like FMCG should continue to be considered extremely expensive compared to the rest of the market, while most other sectors have seen P/E ratios decline over 2012-13. (Click here for tables)

Unsurpisingly, the big individual gainers this year have been shares in IT and consumer goods companies, as Table 5 shows; the big losers are the core sector majors. Finally, Table 6 shows those larger companies that have under- and out-performed their sectors.