Sensex Trades Flat, IT Stocks under Pressure

Thu, 17 Nov 01:30 pm

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The Indian share markets continue to trade on a flattish note during the noon trading session. Sectoral indices are trading on a mixed note with stocks from metal sector are witnessing maximum buying interest. While, stocks from information technology sector are witnessing selling pressure.

The BSE Sensex is trading marginally higher by 2 points and NSE Nifty is trading marginally higher by 4 points. BSE Mid Cap  and BSE Small Cap index are trading lower by 0.1% and 0.2% respectively.

Gold prices, per 10 grams, are trading at Rs 29,335 levels. Silver price, per kilogram is trading at Rs 41,148 levels. Crude oil is trading at Rs 3,081 per barrel. The rupee is trading at 67.7 to the US$.

As per an article in Livemint, NASSCOM- the industry lobby group for India's software industry has lowered its export estimates.

Earlier in February, the lobby expected exports of Indian software services to grow at the pace of 10-12% for the year ended March 2017. However, this forecast has now been lowered to 8-10%. The estimates have been lowered mainly owing to the concerns over Brexit and the recent unexpected election of Mr. Trump as the President of United States of America.

President-elect Trump had repeatedly spoken about restricting immigration and putting curbs on foreign companies taking away US jobs.

Reportedly, software services exporters such as Tata Consultancy Services Ltd (TCS) and Infosys Ltd rely on the H-1B visas to send hundreds of workers to client sites in the US. The future of these engagements has become uncertain.

Not only this, Mr Trump during his campaign talked about reducing wasteful and un-necessary regulations in the banking and financial industry. This in-turn can lead to a cutback in regulatory and compliance spending by banking and financial services, thus adversely impacting the Indian IT industry.

To add to the woes, if Mr Trump scraps Obamacare, the growth from the healthcare sector- the fastest growing segment for Indian IT will come to a halt.

The uncertainty pertaining to the growth in the IT sector, is reflected in the S&P BSE IT index which has gone down by around 18% in the preceding six months. Going forward, the impact of Mr Trump's policies and effects of Brexit would closely be tracked to asses it's impact on India's IT industry.

In another news update, Nestle India expects the fast moving consumer goods (FMCG) industry to fare better in the second half of this fiscal year. The expectations are backed by a good monsoon coupled with the positive effects of the implementations of the seventh pay commission.

During the first half of this fiscal, none of the listed FMCG companies posted a double digit growth. FMCG companies have witnessed either low or middle single digit growth in the first half. This is mainly on the back of suppressed rural incomes due to deficit rainfall in the preceding two years.

The implementation of Direct Benefit Transfer (DBT) schemes, rise in Minimum Support Prices (MSP) for certain agricultural items coupled with a good monsoon could possibly hike rural incomes and in-turn the discretionary spending which can be a big positive for the FMCG companies.

Readers should keep a close watch on the revenue growth of the top FMCG players in the second half of this fiscal to come to an assessment if the rural demand is finally recovering.

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