Sensex Opens Flat; Banking and FMCG Stocks Gain

Fri, 30 Aug 09:30 am

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Asian share markets are higher today as Japanese and Hong Kong shares show gains. The Nikkei 225 is up 1.2% while the Hang Seng is up 0.5%. The Shanghai Composite is trading up by 0.2%. US stocks rallied more than 1% on Thursday, buoyed by gains in the trade-sensitive technology and industrial sectors as China expressed hope on trade negotiations with the United States, easing concerns that rising tensions could stoke a recession.

Back home, India share markets opened on a flat note. The BSE Sensex is trading up by 46 points while the NSE Nifty is trading up by 8 points. The BSE Mid Cap index and BSE Small Cap index opened up by 0.3% and 0.2% respectively.

Sectoral indices have opened the day on a mixed note with healthcare stocks and IT stocks witnessing selling pressure. Banking stocks and FMCG stocks have opened the day in green.

The rupee is currently trading at 71.72 against the US$.

If you look at the stock market returns over the years, you will see that the markets have never moved in a linear fashion.

It has never been a one-way street - only up or down.

Stock markets have always moved in cycles.

If you would have bought stocks when either the Sensex or the Smallcap index was in a downturn, you would have made big returns once the cycle turned and the bulls took over.

The Time to Buy Stocks is Now

The economic slowdown does not herald the end of the world or for that matter the end of India. It's a phase and like all phases - This too shall pass.

The real question is - Are you taking advantage of these price declines to buy quality stocks?

In the news from the economy. As per an article in a leading financial daily, India is targeting companies including Apple, Foxconn and Wistron Corp with a charm offensive aimed at encouraging them to shift business out of trade war-hit China.

Several Indian officials met on 14 August and discussed a list of "target companies" that also include Taiwan-headquartered contract manufacturer Pegatron Corp.

The dispute between the United States and China, the world's two largest economies, has led to higher tariffs on goods worth billions of dollars and disrupted global supply chains, prompting companies to look at other investment avenues to escape higher tariffs.

Amid suggestions that India is late to capitalise on the trade war, government ministries have been asked to submit their policies and incentive structures to Invest India, the country's foreign investment promotion agency. Nine sectors including electronics, autos pharmaceuticals and telecoms will be targeted.

The document said the government will meet companies between August 26 and September 5 to suggest the best investment zones for their operations.

Speaking of US-China trade war, co-head of research, Tanushree Banerjee recently wrote an interesting piece around the Indian companies that could benefit from the trade war. Here's a snippet of what she wrote:

• "Hasbro currently makes about two-thirds of its products in China. Much of that production is already shifting to India and Vietnam.
  
  Meanwhile, Dr Reddy's is shipping a new set of drugs to China. All this while China was importing the drug from the US. But thanks to the steep tariffs the US imports have become unviable.
  
  So, the containers at the Tughlakabad terminal, will ship toys that are made in India, instead of China, to the US.
  
  And they will ship drugs, made in India, instead of the US, to China.
  
  The volume of these shipments, compared to India's overall exports, aren't significant yet.
  
  But they could grow manifold...
  
  ...and potentially make a huge difference to the business of one company in particular."

Moving on to another news. In order to boost the ailing economy, the government has liberalized foreign direct investment (FDI) norms in the four sectors.

The Union Cabinet has allowed 100% FDI in coal mining and contract manufacturing, eased sourcing norms for single-brand retailers and approved 26% overseas investment in digital media.

In single-brand retail trading (SBRT), the definition of 30% local sourcing norm has been relaxed and online sales permitted without prior opening of brick and mortar stores.

Reportedly, the changes in FDI policy will result in making India a more attractive FDI destination, leading to benefits of increased investments, employment, and growth. He said 100% FDI under automatic route in coal mining and sale of coal as also associated infrastructure activity has been allowed to help attract international players to create an efficient and competitive coal market.

Also, 100% FDI under automatic route has been allowed in contract manufacturing to give a big boost to domestic manufacturing.

As per the reports, decisions of the Cabinet are aimed to liberalize and simplify the FDI policy to provide ease of doing business in the country, leading to larger FDI inflows and thereby contributing to the growth of investment, income and employment.

Notably, at US$64.37 billion, FDI in 2018-19 is the highest ever investment received for any financial year.

Note that, the FDI into India exceeded that into China in 2018.

That is a testament of the fact that India's foreign investment policies and business environment are finally competing with that of its Oriental neighbour.

The biggest deal that drove FDI flows to India was Walmart's US$16 billion buyout of Flipkart.

Apart from ecommerce and the digital payments boom, the new bankruptcy framework is also attracting foreign investors with deep pockets.

India aims to receive US$ 100 billion in foreign direct investment (FDI) in the next two to three years.

Special industrial clusters are being created for countries like Japan, South Korea, China, and Russia where their companies can invest and operate.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

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

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