Sensex Continues Downtrend; Telecom Stocks Witness Selling Pressure

Thu, 27 Oct 11:30 am

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After opening the day weak, the Indian share markets registered further losses and are trading in the red. Sectoral indices are trading on a negative note with stocks from the telecom sector and the auto sector witnessing maximum selling pressure.

The BSE Sensex is trading down 155 points (down 0.6%) and the NSE Nifty is trading down 60 points (down 0.7%). Meanwhile, the BSE Mid Cap index is trading down by 1.4%, while the BSE Small Cap index is trading down 1%. The rupee is trading at 66.87 to the US$.

Indian share markets are witnessing selling pressure on the back of various economic developments in the domestic as well as global financial markets.

The markets have been witnessing a downbeat mood this week as the Tata saga unfolds after the ouster of Cyrus Mistry as the chairman of Tata Sons. The recent development in this case is the letter from Cyrus Mistry to Tata Sons board members. Cyrus Mistry, in his five-page letter, warned that the Tata group may face US$ 18 billion in write-downs because of five unprofitable businesses.

Also, the Securities and Exchange Board of India (SEBI) is going to seek a detailed report from the Tata group companies to look into possible violation of corporate governance and listing norms referred by Cyrus Mistry.

Our recent edition of The 5 Minute WrapUp states some of the lessons from the Tata Group slowdown. While doing so, it explains why every stock from even the best business groups are not the best long term bets.

Owing to this development, shares of Tata Motors, TCS, and Tata Steel are trading in the red. ValuePro editor, Radhika has written a series about which Tata Group companies are investment worthy and which are not in HYPERLINK "https://www.equitymaster.com/valuepro/?utm_source=submenu" \t "_blank"ValuePro Contenders.

In another news update, the Union Cabinet is likely to consider today, the proposal of NITI Aayog for strategic stake sale in over a dozen public sector undertakings (PSUs). Reportedly, NITI Aayog has shortlisted some public sector units where the government can sell its majority stake to private companies. The proposal is in order to bring in greater efficiency and professionalism in functioning.

As per us, the above development is a positive news indeed. Most of the PSUs are surviving on the hard earned money of the taxpayers. For instance, the Union Budget 2016-17 allocated Rs 250 billion to recapitalize the public sector banks. Further, the government has already poured up to Rs 222.8 billion to keep Air India running. Now, where does this money come from? From us who are burdened with taxes.

The sale of PSUs will surely attract agitation from the employee unions. However, India is at a stage wherein it cannot afford the unproductivity at public sector enterprises being HYPERLINK "https://www.equitymaster.com/diary/detail.asp?date=06/14/2016&story=3&title=The-Sunk-Cost-of-Air-India" \t "_blank"subsidised by the government. Further, every rupee that goes towards sustaining these companies is taken away from something else. Hence, the decision for a strategic sale of the PSUs needs to be taken sooner rather than later as the decision is inevitable.

To know more on the above issue, we recommend you to read some of the recent articles in The Vivek Kaul Letter (subscription required). Vivek Kaul addresses a range of big issues - such as the government's handling of oil prices, the mess in public sector banks, the current state of India's real estate bubble...and a lot more!

In fact, Vivek has just come out with a video that details all...including how these macro trends could impact you.

Click here to know more.

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

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