Sensex Trades on a Negative Note; IT Stocks Witness Selling

Tue, 31 Jan 11:30 am

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After opening the day in the red, the Indian share markets continued to trade on a negative note. Sectoral indices are also trading with a negative bias with stocks in the IT sector and oil & gas sector witnessing maximum selling pressure.

The BSE Sensex is trading down 134 points (down 0.5%) and the NSE Nifty is trading down 49 points (down 0.6%). The BSE Mid Cap index is trading down by 0.6%, while the BSE Small Cap index is trading down by around 0.5%. The rupee is trading at 67.81 to the US$.

Market participants in the Indian stock markets are keeping tabs on the Economic Survey 2017-18, which is to be presented today by Chief Economic Advisor Arvind Subramanian. The survey is likely to provide insights into the impact of the recent demonetization drive, likely GDP growth target, possibility of cash transaction tax, and fiscal targets. It is also said to provide pre-budget signals.

Speaking of budget, there is no dearth of speculators trying to predict the possible announcements and expected market moves. However, if one has to go by history, there is no clear trend when it comes to market movements pre and post budget. This is evident in the chart below:

Short term Impact of Budget on Stock Markets

Note: Pre-budget data is until the previous day's closing. Post budget includes Sensex close on the budget day. Data for 2017 is from January 2 to January 8.

The past trend for Indian Indices pre and post budget, as is seen above, has been volatile. And 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.

In other news from global markets, US President Donald Trump has ordered to curb travel and immigration from some countries. So far, Trump has signed executive orders to suspend travel to the United States from seven Muslim-majority countries on grounds of national security. He has also banned refugees from Syria.

As far as India is concerned, Trump's emphasis on bringing jobs back to the US, his anti-immigrant stand and his stated aversion for H-1B Visa is expected to have a negative impact on the Indian IT industry.

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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