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Sensex Trades Marginally Lower; Telecom Stocks Witness Selling
Mon, 27 Feb 11:30 am

After opening the day on a flat note, the Indian share markets witnessed choppy trades and are presently trading marginally lower. Sectoral indices are trading on a negative note with stocks in the telecom sector and banking sector witnessing maximum selling pressure.

The BSE Sensex is trading down 2 points (down 0.01%) and the NSE Nifty is trading down 17 points (down 0.2%). The BSE Mid Cap index is trading up by 0.1%, while the BSE Small Cap index is trading up by 0.3%. The rupee is trading at 66.70 to the US$.

Market participants in the domestic share markets are eyeing the second official estimate of GDP growth data that is going to be released tomorrow by the Central Statistics Office (CSO).

As per an article in the Economic Times, the CSO is expected to peg India's GDP growth below 7% in FY17, tripped by the government's notebandi move that dented the consumption demand.

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The CSO's first estimate released on January 6 pegged growth at 7.1% in FY17. However, this estimate did not include the impact of notebandi as there was no sufficient data regarding the government's notebandi drive.

Here is what Dr Jim Walker, founder and chief economist of Asianomics Group, had to say about the above estimates in one of his latest Asianomics Macro updates:

The government's new growth forecasts are not only optimistic but downright bizarre. The market is concerned that even with the new (still optimistic) growth forecast of 7.1%, the government's budget deficit target of 3.5% of GDP will be overshot.

A while back, in an interview with Vivek Kaul and Rahul Goel, CEO of Equitymaster, Dr Jim Walker had shared his views on a variety of topics including the Indian and Chinese economies. It's worth revisiting.

One shall note that the Indian economy is still facing troubles on the back of notebandi drive initiated by the government. The government will continue with its lies to tell us that all is well on the notebandi front, but that doesn't make the situation any better for the common man.

In the news from global markets, investors are keeping tabs on US President Donald Trump's first address to the US Congress on Tuesday.

As per the news, Trump's first Budget proposal will spare big social welfare programs such as Social Security and Medicare from any cuts. It is also said that Trump would preview some elements of his extensive plans to cut taxes for the middle class, simplify the tax system and make American companies more competitive globally with lower rates.

The recent move by the Trump administration was the immigration restrictions. The move got opposition from some of high-tech companies, which argued that Trump's temporary ban on all visitors from seven predominantly Muslim countries would hurt their businesses.

Many Indian IT companies are also feeling the brunt of the above immigration ban. Large Indian IT companies, on an average generate more than 50% of their revenues from the US clients. They have built a strong client base over the years in the US market. If the suggested changes for immigration get cleared, the cost component for the Indian IT companies will go up. The need to reduce their US exposure and move to other geographies is a given.

Will Trump Mania Impact IT Companies Revenues from US?

However, we believe that it is unlikely that the companies will substantially bring down their focus on the US. Instead companies may look out for other means to reduce costs or protect margins.

That said, Indian IT companies will also need to rise to Trump's challenges. But fortunately, most were already gearing up for this. Trump may have only accelerated their defence.

So as long as you aren't worried about the revenue guidance in the coming quarters, you need to do just one thing: Watch the valuations.

And you never know, the Trump crash may be an opportunity to act on not just IT but lots of other safe stocks as well.

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

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Sep 26, 2017 03:35 PM

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