Indian Indices Trade Marginally Higher; Telecom Stocks Witness Buying

Mon, 23 Oct 11:30 am

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Stock markets in India are presently trading marginally higher. Sectoral indices are trading on a mixed note with stocks in the telecom sector and realty sector witnessing maximum buying interest. Auto stocks are trading in the red.

The BSE Sensex is trading up 37 points (up 0.1%) and the NSE Nifty is trading up 13 points (up 0.1%). The BSE Mid Cap index is trading up by 0.3%, while the BSE Small Cap index is trading flat. The rupee is trading at 65.00 to the US dollar.

After ending on a negative note on Muhurat trading last week, Indian indices gained their momentum and went on to trade on a positive note today.

Note that the Sensex has been making new highs everyday of late. In fact, amongst all major indices, the Indian stock markets have given the best returns in 2017, as can be seen from the chart below:

Global Index Returns in 2017

Back in March 2016, we had predicted Sensex to touch 40,000 within a 3 to 4 year timeframe. At this pace, it seems like Sensex might get there sooner rather than later.

However, this may not necessarily be a good thing. The current run seems to extrapolate all good news into the future and expects the ride to be smooth and consistent. But, history has shown that markets rarely work that way.

Also, note that earnings of Indian companies are currently unusually low. Even when measured against sales, the Sensex and the broader BSE 500 indices are close to their peak valuations.

Of course, some stocks could correct less than others. Blue chips, for instance, continue to trade at more reasonable valuations than small caps. Meaning their downside risk is less. But buying any stock at its all-time high, ignorant of the downside risk, could be a recipe for disaster.

In such an environment, it makes sense for investors to be selective while buying stocks and focus on value and the underlying fundamentals of the business.

In the news from the IPO space, Indian Energy Exchange (IEX) has made a tepid debut today.

The scrip of the company got listed at Rs 1,500 on Indian bourses today, a discount of 9% to its issue price of Rs 1,650.

The issue was sold between October 9 and October 11 and had been subscribed 2.2 times.

Indian Energy Exchange (IEX) is one of two exchanges in India that offers an electronic platform for the trading of electricity products. IEX is the largest exchange for the trading of a range of electricity products in India in terms of traded contract volumes in FY17 according to the Central Electricity Regulatory Commission (CERC).

To know more about the company, you can read our IPO note on Indian Energy Exchange Ltd (requires subscription).

Also, if you want to know more about IPOs and whether they are right for you, you can download the free special report - How to Get Rich with IPOs.

In the news from Goods and Services Tax (GST) space, Revenue Secretary Hasmukh Adhia has said that some rejig in the rate structure of the GST is required.

The reduction, as per him, is to reduce the burden on small and medium businesses and make the tax regime industry friendly.

Note that while GST have benefitted the organized players in a big way, it is the unorganized segment who have taken a big hit. First, it was demonetization and now it is the implementation of GST. This hit is well reflected in the gross domestic product numbers. GDP growth has slumped to 5.7% in the June quarter from a high of 7.9% clocked in the June quarter of 2016.

So relaxations for small and medium businesses will certainly boost performance of such companies in various industries.

The transition to goods and service tax (GST) is a tough one. However, if implemented properly, the tax will reap huge benefits in the long run.

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

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