Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.This is an entirely free service. No payments are to be made.
After opening the day marginally higher, the Indian indices registered losses and went on to trade in the red. Sectoral indices are trading on a mixed note with stocks from the realty, telecom and consumer durables sector witnessing maximum selling pressure. Energy stocks are trading in the green.
The BSE Sensex is trading down 106 points (down 0.4%) and the NSE Nifty is trading down 50 points (down 0.6%). The BSE Mid Cap index is trading marginally higher, while the BSE Small Cap index is trading down 0.2%. The rupee is trading at 66.92 to the US$.
In a news from the commodity space, as per the World Gold Council (WGC), gold had its best first half of the year - up 25% in US dollar terms. The metal is also being seen as a buying opportunity in India after the WGC stated that the demand for yellow metal will rise in the second half of 2016.
Gold has been in favour recently for many reasons. Participants in the global markets are increasing their exposure to gold as a safe haven bet against the ongoing global volatility. Also, many of the world's most intelligent and successful investors have recommended owning gold. The list includes David Einhorn, Seth Klarman, George Soros, and Stanley Druckenmiller and the noted investor Marc Faber. In an interview with The Economic Times, Marc Faber stated that he still is bullish on gold over other asset classes. He also shared his views on Indian markets and explained why he would rather invest in India than in the US. One of the recent editions of The 5 Minute WrapUp details Mr Faber's views on India.
At the time of writing, the yellow metal was trading at Rs 31,426/10 gms, up by 0.66%.
Moving on to the news from the global markets... Stock markets in China were trading at their highest in more than seven months on Monday. This was seen as market participants bet that disappointing economic data for July would prod Beijing to unleash fresh stimulus.
On Friday last week, China reported weaker-than-expected set of data for investments, lending, retail spending and factory output. Fixed asset investment in the private sector slowed to -0.6% from -0.5% in June. Fixed asset investments for state owned enterprises also slowed from 24% in June to 14% in July. Further, fiscal spending grew only 0.3% in July. This was as against an over 15% in the first half of the year. Property sector investment slowed from 3.5% in June to 1.4% in July.
These numbers, on top of weak trade data, have revived hopes that the Chinese government will introduce more support measures this year to meet its ambitious economic growth targets. Only time will tell how the Chinese government responds to the above numbers. If the government introduces stimulus measures, China would join the club of countries that are trying to prod growth through lower interest rates and stimulus measures. The question we have is this: Do these measures actually lead to growth? Asad Dossani, editor of Daily Profit Hunter, has answered this issue in one of his recent articles. He calls these measures the definition of insanity and explains how one can successfully trade such events.
Regarding stock markets, many participants are worried that China and its slowing economy will bring more concerns for Indian markets. However, we believe that a crash can be an ideal time to bet on solid Indian companies that are well-shielded from any adverse developments in China.
For information on how to pick stocks that have the potential to deliver big returns, download our special report now!