Sensex Opens Flat; Realty and Automobile Stocks Lag

Mon, 3 Feb 09:30 am

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Asian stock markets are lower today as Chinese and Hong Kong shares fall. The Shanghai Composite is off 7.9% while the Hang Seng is down 0.1%. The Nikkei 225 is trading down by 1%. In US, stocks fell sharply on Friday, wiping out the Dow Jones Industrial Average's gain for January, as investors grew increasingly worried about the potential economic impact of China's fast-spreading coronavirus.

Back home, India share markets opened on a flat note. The BSE Sensex is trading up by 49 points while the NSE Nifty is trading up by 21 points. The BSE Mid Cap index opened up by 0.3% while BSE Small Cap index opened down by 0.3%.

Sectoral indices have opened the day on a mixed note with oil &gas stocks and IT stocks witnessing buying interest. Realty stocks and automobiles stocks are trading in the red.

The rupee is currently trading at 71.63 against the US$.

Speaking of the current stock market scenario, while everyone out there is buzzing about the Budget and what it has in store for the stock markets, our analysts at Equitymaster are singing a different tune.

They are encouraging readers to look beyond the short-term blip that the Budget will bring and focus on the long-term trend that will rule the market...

Ankit Shah, editor of the Equitymaster Insider tells you where your focus should lie... Here's a snippet of what he wrote about small cap stock rebound in one of his article:

• "The BSE Smallcap index hit its lowest level since 2018 on 22 August 2019 when it closed at 12,119.
  
  From its January 2018 peak of 20,047, that was a 40% crash. Hundreds of individual stocks crashed even more.
  
  But since the August 2019 low, smallcaps have been making a comeback.
  
  The BSE Smallcap index is up 19% from its August 2019 low.
  
  In fact, since the start of 2020, the uptrend has accelerated!"

Now, look at this chart...

Of the 704 stocks in the index, 532 stocks have gained during this period, whereas 170 stocks have continued to bleed.

The 532 stocks that gained have gone up by an average of 30%. The 170 small cap stocks that reported declines are down 18% on average.

You can see the smallcap index is rebounding to levels we saw in the first half of 2019. In fact, it is just 1% below the level it was a year ago.

So, what do you think about this trend, dear reader? Will the rally sustain, or will it fizzle out?

Well, Ankit believes you can find a lot of great buying opportunities in the smallcap space and this is a great time to be invested in smallcaps.

However, he also points out that, keep in mind that not everything you touch will turn into gold. You should be very careful and selective in picking the most solid and promising smallcap stocks.

Meanwhile, in the video below, smallcap analyst Richa Agarwal talks about the ongoing economic slowdown, an upcoming rebound in the small cap space, and her number 1 stock pick for 2020.

Watch now...

Moving on... Foreign investors pumped in more than Rs 120 billion in stock markets in January, remaining net buyers of Indian equities for the fifth consecutive month helped by easing concerns pertaining to geopolitical tension between the US and Iran coupled with US-China trade war.

In the equities segment, FPIs invested Rs 75.5 billion in September, Rs 123.7 billion in October, Rs 252.3 billion in November and Rs 73.4 billion in December.

According to depositories data, a net sum of Rs 121.2 billion was pumped into equities last month by foreign portfolio investors (FPIs).

However, a net amount of Rs 111.2 billion was withdrawn from the debt segment during the same period. This translated into a net investment of Rs 10 billion.

On Saturday, FM Nirmala Sitharaman in the budget said that certain government securities will be open for foreign investors, adding that the Centre plans to increase investment limit for FPIs in corporate bonds from 9% to 15%.

How this pans out going forward remains to be seen. Meanwhile, we will keep you updated on the developments from this space.

In another development, listing of insurance behemoth Life Insurance Corporation (LIC) may be done in the second half of the next financial year, Finance Secretary stated on Sunday.

FM Nirmala Sitharaman while presenting the Budget 2020-21 on Saturday announced stake sale in LIC through an initial public offer in the next fiscal.

The government aims to garner Rs 900 billion from the listing of LIC and stake dilution in IDBI Bank in the next fiscal out of total disinvestment target of Rs 2.1 trillion.

The government currently owns 100% in LIC, while it holds around a 46.5% stake in IDBI Bank.

The 60-year-old state-owned firm, LIC, is the country's largest insurer, controlling more than 70% of the market share. The insurer has a market share of 76.3% in number of policies and 71% in first-year premiums.

LIC has many subsidiaries including IDBI Bank. It acquired controlling stake in IDBI Bank last year.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

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

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