Sensex Opens on a Negative Note; Realty Sector Leads the Losses

Wed, 9 Aug 09:30 am

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Asian stock markets are trading in red today with the Hang Seng down by 0.78%, while Nikkei is down 1.52%.

Meanwhile, Indian share markets have opened the day on a negative note. The BSE Sensex is trading down by 130 points and the NSE Nifty is trading down by 32 points. The S&P BSE Mid Cap and S&P BSE Small Cap are trading lower by 0.9% and 0.8%, respectively. Losses are largely seen in realty stocks and healthcare stocks.

The rupee is trading at 63.79 against the US$.

In news from result updates, Tata Motors, Eicher Motors, Aurobindo Pharma, Nalco, Nagarjuna Fertilisers, etc. are some of the companies that are going to report their June quarter earnings today.

One shall note that the upside in corporate earnings has been successful bait for Indian investors. The average profit margins of Indian companies continue to languish near historical lows. But the worry is that the surge in valuations since 2016 has been devoid of profit growth.

Now since earnings are currently low, looking at sales, which are relatively more stable, can give a good sense of how expensive markets are. It turns out the Sensex and the broader BSE 500 indices are closer to their peak valuations when measured against sales, as can be seen from the chart below:

Indices Close to Peak Valuations Measured Against Sales

The tireless bull run this year has led many individual stocks trade at expensive valuations. But despite this, one stock that makes the cut both technically and fundamentally has come under Ankit's radar. Now, as you know, at Insider, Ankit has access to the Equitymaster research vault. So today, make sure you sign up to get his recommendations.

In other news, as per an article in the Economic Times, the India Meteorological Department (IMD) has said that monsoon rainfall is likely to remain normal in the remaining two months of the season this year.

As per the IMD, the seasonal (June to September) rainfall over the country as a whole is likely to be normal (96% -104% of Long Period Average) as predicted in June.

As per the IMD data, rainfall in the four-month season since June 1 has been normal in most parts of the country, barring the southern states. It has been normal or excessive in the key crop-growing states in northern and western India although the past 10 days have seen relatively weak rainfall.

The above development has set the stage for a good kharif harvest and strong rural demand this year.

One shall note that a normal monsoon is critical to India since most of our farmers are still dependent on monsoon rains for their subsistence.

The rural economy has witnessed two consecutive draughts like situation in the past few years and monsoon has been above normal only since 2012.

So, a normal rainfall this year bodes well for the Indian economy and will certainly aid many sectors. Having said that, the above trend is certainly not something to speculate on while buying stocks.

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