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Sensex Continues Momentum; Energy Stocks Witness Buying
Wed, 22 Feb 11:30 am

After opening the day marginally up, stock markets in India have continued their momentum and are presently trading in the green. Sectoral indices are trading on a mixed note with stocks in the energy sector and realty sector witnessing maximum buying interest. IT stocks are trading in the red.

The BSE Sensex is trading up 121 points (up 0.4%) and the NSE Nifty is trading up 33 points (up 0.4%). The BSE Mid Cap index is trading flat, while the BSE Small Cap index is trading up by 0.1%. The rupee is trading at 66.92 to the US$.

As per an article in the Economic Times, private equity (PE) and venture capital (VC) investments in India touched US$ 1.2 billion in January across 43 transactions. However, this was recorded as 6.3% lower in value terms over the year ago period.

In terms of volume too, the above investments saw a 6.5% decline. This was seen mainly due to a decline in number of growth or expansion funding and high value deals. As per the EY report, more than half of the deals were for less than US$ 10 million each.

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The above declining trend in investments could be due to the absence of profitability in many e-commerce businesses that caught the fancy of many venture capitalists and private investors last year.

Presently, most of these e-commerce businesses are mired in losses.

Loss-Making Unicorns

If the above losses keep getting bigger, there will be a point when venture capitalists and private equity funds will further re-assess their investments and start thumbing down valuations of these firms. In fact, a valuation correction is underway in the domestic e-commerce segment right now.

No wonder Vivek Kaul calls these ecommerce companies Ponzi schemes, with individual investors...perhaps you...stuck at the end. And speculators who discount fundamentals will turn out to be the greatest fool in this greater fool theory at work in the Indian e-commerce space.

On the news from global financial markets, Fed officials indicated that America's central bank will still be able to raise its benchmark interest rate at three separate occasions in 2017.

Patrick Harper, one of the fed officials, stated that the state of the US economy is back to normal and there can be three modest rate hikes of 25 basis points each as appropriate for 2017.

The same expectation of three interest rate increases was also expressed the Federal Open Market Committee (FOMC) two months ago following its December meeting.

All eyes are now set on the upcoming Federal Open Market Committee (FOMC) meet which is scheduled on March 14-15. The meeting will decide Fed's stance on interest rates.

We doubt the strength and durability of the US economic recovery since it has been driven mainly by massive doses of money printing and artificial suppression of interest rates. Hence, we also doubt the Fed's capability to further raise interest rates.

As per Asad, the Fed's promise of more interest rate increases will lead to the end of easy money and will create big trends that traders can profit from.

Speaking of trading, our colleague Apurva Sheth of the Profit Hunter team released a detailed report on trading stocks. The special report talks about what he believes could be extremely effective stock trading strategy. Importantly, the strategy could be implemented in four easy steps. Get your hands on this report right now.

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

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Nov 24, 2017 (Close)