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 on a flat note, the Indian share markets have continued to trade near the dotted line. Sectoral indices are trading on a mixed note with stocks in the metal sector and telecom sector witnessing maximum buying interest.
The BSE Sensex is trading up 23 points (up 0.1%) and the NSE Nifty is trading up 11 points (up 0.1%). The BSE Mid Cap index is trading flat, while the BSE Small Cap index is trading up by 0.3%. The rupee is trading at 66.70 to the US$.
The US Fed kept interest rates unchanged in its Federal Open Market Committee (FOMC) meeting yesterday. However, the central bank signalled a possible rate hike in the month of December as the economy picks up steam.
As per the FOMC, the case for an increase in the federal funds rate remains strong. However, the committee, at the recent meet, has decided to wait for some further evidence of continued progress towards its objectives.
The FOMC release note stated that the stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2% inflation.
The next Federal Reserve monetary policy meet is scheduled in mid-December. While, 14 of 17 Fed officials expect to raise rates before the end of this year, the outcome here will largely depend on how markets react to the US presidential elections.
In our view, a possible rate hike in December by the Fed will have no less an impact on Indian financial markets than it will have in the US. The hike, however small, will lead to a global change in the direction of interest rates. This could mean a pullback of cheap liquidity from emerging markets, including India.
We believe, investors must be prepared to witness increasing volatility in the stock markets. Apart from the above development, several domestic factors are likely to influence the course of Indian stock markets in the coming times. Our message to investors is to not fear volatility and uncertainty. Instead, use it to your advantage as increased volatility could throw up bargain buying opportunities.
Apart from the Fed meeting, the recent announcements regarding the US presidential elections rattled investors across global stock markets.
As per the news, recent polls show that the US presidential elections would be a tight contest. Markets had earlier perceived that Hillary Clinton was ahead in the race. However, the latest poll showing Donald Trump rapidly closing the gap has prompted flight to safer havens.
Owing to this, stock markets witnessed selling pressure and the US dollar extended its downtrend seen yesterday. The brunt was also seen in Indian share markets. As per the Economic Times, the India VIX index, a gauge for market volatility, soared nearly 7% as investors feared an upset by Republican nominee Donald Trump.
Donald Trump's win is expected to deal a big blow to US' trade deals with Asia. His stance on trade, immigration and foreign policy is already making markets jittery. And while economies like China may suffer the most, Indian exports will not remain untouched.
In the news from domestic stock markets, the government is said to steer clear the Tata-Mistry tussle. Minister of State for Finance Arjun Ram Meghwal yesterday said that the government is keeping a close watch on the Tata-Mistry feud as developments at the US$ 100 billion conglomerate can have implication for the economy.
Earlier, last week, Cyrus Mistry had warned that the Tata giant may face US$ 18 billion in write-downs because of five unprofitable businesses he inherited. 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 to by Cyrus Mistry.
Vivek Kaul, in a recent article, points out one basic lesson in investing from the Tata-Mistry spat. He believes that the fall in market capitalisation of Tata group of companies is not as much as is being made out to be. One of the recent editions of The 5 Minute WrapUp too offers some lessons from the Tata Group slowdown. While doing so, it explains why every stock from even the best of the business groups may not be a good long term bet.
For information on how to pick stocks that have the potential to deliver big returns, download our special report now!