Sensex Opens Flat; Telecom Stocks Under Pressure

Fri, 25 Oct 09:30 am

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Asian share markets are lower today as Chinese and Hong Kong shares fall. The Shanghai Composite is off 0.1% while the Hang Seng is down 0.3%. The Nikkei 225 is trading flat. The S&P 500 and the Nasdaq rose on Thursday following strong quarterly reports from several technology companies, including Microsoft Corp but dour results from 3M Co stymied the Dow Jones Industrial Average.

Back home, India share markets opened flat. The BSE Sensex is trading down by 7 points while the NSE Nifty is trading up by 4 points. The BSE Mid Cap index and BSE Small Cap index opened flat.

Sectoral indices have opened the day on a mixed note with FMCG stocks and witnessing maximum buying interest. Telecom stocks and power stocks have opened the day in red.

The rupee is currently trading at 71.06 against the US$.

The rupee snapped its five-day winning streak to finish 11 paise lower at 71.02 against the US dollar on Thursday, weighed by unabated foreign fund outflows and a weak trend in domestic equity markets.

At the interbank foreign exchange market, the local currency opened on a strong note at 70.79 but lost ground during the day to touch a low of 71.08.

It finally settled at 71.02, lower by 11 paise against its previous close.

On October 23, the rupee rose 3 paise to close at 70.91 against the US dollar amid lack of triggers and geopolitical uncertainties.

Speaking of currencies, Vijay Bhambwani, editor of Weekly Cash Alerts, tells you the main reasons why not to trade commodities and currencies the same way you would trade equities. Here's an excerpt of what he wrote...

• Currencies are traded in pairs and the most liquid is the USDINR. Currencies are traded in four decimal points just as bonds are. The international derivative trader's association has indicated that forex may be traded in 6 decimals in the coming few years.
  
  It takes months sometimes for the currency pair to pass the next round figure, say from 70 to 71.
  
  Can you really trade commodities and currencies alike or for that matter, equities and currencies alike? Definitely not!

To know more, you can read Vijay's entire article here: Is Trading in Equities, Commodities, and Currencies the Same?

In the news from the banking sector. IDFC First Bank reported Rs 6.8 billion loss in the second quarter of the current financial year as a result of one-time tax impact of Rs 7.5 billion due to markdown of existing deferred tax assets, following the change in corporate tax rates.

The lender reported net interest income of Rs 13.6 billion, up 202% year-on-year from the Rs 4.5 billion, which is the period before the merger of IDFC Bank and Capital First.

The net interest margin for the bank grew to 3.43% for the quarter from 1.56% of the pre-merger period.

The gross NPA ratio remained stable sequentially which was 2.31% compared with 2.32% in the first quarter.

IDFC First Bank share price opened the day up by 3.1%.

2019 has been brutal for some banking stocks.

The market has severely punished them. This is due to issues such as worsening asset-quality, corporate governance, and inadequate capital.

Stocks such as Yes Bank and Lakshmi Vilas Bank are down more than 70%.

Falling Knives in the Banking Sector

Surprisingly, RBL Bank is the latest victim added to the worst performers list of 2019. You see, RBL Bank is down 64% from its recent high in May 2019.

What's the issue here?

Well, the management expects to face challenges in recovering some loans in the near term.

They have guided for elevated stress in a few corporate accounts, rising non-performing assets, and higher provisioning. This could impact the earnings of the bank.

Does this situation seem familiar to you?

Falling stock prices could be enticing. After all, we love deep discounts and good bargains.

But if you're thinking of buying these stocks it's important to remember this point - If a stock is in a falling spree, there's probably a good reason behind it.

And realising this in a falling market is the first step towards correcting one's investing process.

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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