Indian Indices Trade Near the Dotted Line; Auto Stocks Witness Selling

Mon, 30 Jan 11:30 am

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After opening the day on a flat note, the Indian share markets witnessed choppy trades and continued to trade near the dotted line. Sectoral indices are trading on a mixed note with stocks in the information technology sector and auto sector witnessing maximum selling pressure. Stocks in the telecom sector are trading in the green.

The BSE Sensex is trading down 14 points (down 0.1%) and the NSE Nifty is trading down 10 points (down 0.1%). The BSE Mid Cap index is trading up by 0.2%, while the BSE Small Cap index is trading flat. The rupee is trading at 68.05 to the US$.

Indian stock markets are looking forward to potential changes the Union Budget 2017 could bring. The budget comes within months of demonetisation and market participants are wondering what measures the government will take to stimulate the economy.

This, along with the result announcement from over 100 companies today, has led Indian share markets trade on a volatile note. The market is expecting depressed earnings for the third quarter (Oct-Dec 2016).

This begs the question: What can one do to sail safely through these volatile times?

As Buffett-heads who take his advice like fish to water, we think the best way to counter volatility is to follow a long-term value investing approach.

It's also important to have a set process in place, as Rahul Shah, co-head of research at Equitymaster, showed us at the Equitymaster Conference 2017. Many of you have already tasted the fruits of one of Rahul's processes with his Microcap Millionaires service.

But at the Conference, Rahul asked attendees to mark 10 February 2017 on their calendars. The reason? He will send out his first Profit Velocity report to subscribers.

As you may have guessed, Profit Velocity is a system-based investing approach.

With Profit Velocity, Rahul believes that the system could help subscribers fetch gains several times those of the benchmark index.

US President Donald Trump's protectionist moves are making the news in global financial markets. The president is determined to wall off America's border with Mexico. Apart from that, there's also a proposal of 20% tax on imports from Mexico.

The above developments have triggered a fresh fight over trade between Mexico and the US. Also, this follows Trump's fight over multinational trade as he pulled the US out of the 12 nation Trans-Pacific Partnership (TPP) trade deal last week.

Trump also aims to renegotiate the North American Free Trade Agreement (NAFTA) at an appropriate time. NAFTA enacts a free trade zone between the US, Canada, and Mexico. Trump said that he would move to withdraw from the agreement if no 'fair deal' is forthcoming, pledging to stop trade deals that harm American workers.

In order to bring down US imports, Trump is planning to direct the Secretary of Commerce to identify every violation of trade agreements a foreign country is currently using to harm the US workers. Currently, US imports more than it exports to other nations. This can be seen in the chart below:

American Imports Exceed Exports

The withdrawal from the NAFTA will not impact India directly, but the resulting adverse currency movements could hurt us. For example, the Mexican peso is under pressure. The falling currency boosts Mexican exports, which could lead to a decline of India's global export market share.

All we can do for now is wait and see how the above developments pan out.

For investors, this is a reminder that geopolitical equations and their changing nature deserve attention, especially when evaluating an industry's growth prospects. Investors could do well to favour companies that are better geared to withstand a variety of geopolitical developments.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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