Weak Global Markets; Populist Union Budget & Top Cues to Sway the Market Today

Mon, 5 Feb Pre-Open

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Indian stock markets nosedived as Union budget focused on populist measures and imposed a long-term capital gains tax (LTCG) on equities. A sell-off in global equities also dampened sentiment, with Rs 4.34 trillion in notional investor wealth getting wiped out during the day.

At the closing bell, the BSE Sensex stood lower by 840 points (down 2.3%) and the NSE Nifty closed down by 256 points (down 2.3%). The BSE Mid Cap index ended the day down 4%, while the BSE Small Cap index ended the day down by 4.7%.

Losses were seen across all sectors with stocks in the realty sector and stocks in the power sector leading the losses.

Results Corner

Tata Global Beverages share price could see some action as the company reported a 30.51% increase in its consolidated net profit at Rs 1.88 billion for the quarter ended December 2017. The company had posted a net profit at Rs 1.44 billion during the same period of the previous year.

Meanwhile, Bajaj Auto Ltd a 3% rise in December quarter net profit to Rs 9.52 billion in the three months ended 31 December from Rs 9.24 billion a year ago. The company snapped a downward trend that lasted for four consecutive quarters up to September, on the back of higher three-wheeler and motorcycle sales.

Hindalco Industries share price finished the previous trading session down by 3%. The company's Q3 profit jumped 17.7% to Rs 3.77 billion. Hindalco's profit rose for the first time in three quarters, revenue from operations grew 11% to Rs 110.23 billion.

Top Stocks to Watch Out

Tata steel share price is expected to be in limelight today after it was reported that the company acquired 74% stake in Bhubaneshwar Power (BPPL) from JL Power Ventures for Rs 2.55 billion to ramp up its captive source of power. The company also announced an investment of over £14 million (Rs 1.27 billion) in its hot strip mill at Port Talbot in South Wales, which the Indian steel giant says will help manufacture higher-value steels.

L&T share price is expected to see momentum today as the company's construction arm has won orders worth Rs 22.75 billion across business segments.

In news from automobile sector, Hero Motocorp share price could see some action today after the company reported a growth of 31% to sell 641501 units in January. The company had sold 487088 units in the year-ago period.

In another development, Jaiprakash Power Ventures Ltd has offered its Nigrie power project to NTPC for acquisition while State Bank of India has proposed stake sale in three stressed plants of Bajaj Lalitpur, Jaypee Infratech and Jindal India Thermal to the NTPC as well.

Meanwhile, Coal India Ltd's sales rose to a record in January. The miner, which accounts for more than 80% of India's coal production, has increased output year-on-year every month since August, helping power plants, its biggest customers, replenish their inventories.

IPO Segment

As per an article in The Economic Times, Lodha Developers plans to file the draft prospectus for a US$700m-US$1bn IPO later this month and is targeting a launch in the second quarter. The Indian property company planned an IPO of Rs28bn (US$437m) in 2010, but did not launch because of weak market conditions.

After such stellar response to IPOs in 2017, all focus and attention will shift to the major IPOs in the upcoming new year 2018 which includes IPOs of HDFC Asset Management Company, NSE and IRCTC to name a few.

To know more, you can download our FREE report - How to Get Rich with IPOs. This guide will show you how to safely profit from the 2017 IPO rush.

However, The market euphoria is something similar to what was seen in 2007-08. When everyone around you is clamoring to get a piece of the IPO pie, it makes sitting tight difficult. And, why should you sit tight when stocks like Avenue Supermart lets you pocket a cool 100% gain from day 1 of the listing?

History suggests that these cases are few and far between. More than 70% of the IPOs listed in 2007 and 2008 are in the red, even today when the Sensex is at an all-time high.

This allows us to stay on the fence when it comes to investing in IPOs. But it doesn't make sense to completely ignore this space. For every Reliance Power - like issue, there have been issues like Maruti, TCS, and Jubilant Foodworks Ltd (with returns over 4,000%, 1,000% and 500% respectively) that have created immense wealth for shareholders. A merit-based selection primarily including valuation, business, and management quality is the logical way to go about it.

Bitcoin Cracks

Bitcoin has had a disastrous week, falling below US$8,500 as investors remain spooked about the future of cryptocurrencies. Bitcoin fell as low as US$7,695.10 on Friday according to CoinDesk, marking the first time it has fallen below the US$8,000 level since November 24.

Other cryptocurrencies including Ethereum, Ripple, and Litecoin have all plunged between 20 to 30% each. It's been a jarring turnaround for cryptocurrencies considering Bitcoin touched an all-time high of US$19,783 on December 17^th.

It also appears to be the end of the road for cryptocurrencies in India. Arun Jaitley, in his budget speech stated that the government will do everything to discontinue the use of bitcoin and other virtual currencies in India. He reiterated that India does not recognize them as legal tender and will instead encourage blockchain technology in payment systems.

US Markets Plunge

US markets closed sharply lower, extending a weeklong slide, as the Dow Jones industrial average plunged more than 600 points. Stocks ended their worst week in two years and the Dow's drop was its biggest in percentage terms since June 2016.

Several giant U.S. companies dropped after reporting weak earnings, including Exxon Mobil and Alphabet. Apple and Chevron also fell.

Bond yields rose sharply after the government reported the fastest wage growth in eight years, stoking fears of inflation. The increase in bond yields hurts stocks in two ways: it makes it more expensive for companies to borrow money, and it also makes bonds more appealing to investors than riskier assets such as stocks.

Economists and analysts have cautioned about the heightened risk of a market correction following months of steadily climbing equity valuations.

Oil Prices Finish Lower

Oil prices finished lower on Friday to tally a loss of roughly 1% for the week. Recent data raised concerns that a likely rise in monthly U.S. production to its highest level on record will offset the Organization of the Petroleum Exporting Countries' (OPEC) efforts to ease global supplies.

To keep a tab on the movements in crude oil and other commodities, you can read the stock market commentary from the Daily Profit Hunter team. Their commentary tracks the developments in the global economy as well as stock, currency and commodity markets.

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

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