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Indian Indices Continue Downtrend; Consumer Durable Stocks Bleed
Tue, 15 Nov 11:30 am

After opening the day on a weak note, the Indian share markets registered further losses and continued to trade deep in the red. Sectoral indices are trading on a negative note with stocks from the realty sector and the consumer durables sector witnessing maximum selling pressure.

The BSE Sensex is trading down 374 points (down 1.6%) and the NSE Nifty is trading down 142 points (down 1.7%). Meanwhile, the BSE Mid Cap index is trading down by 4.4%, while the BSE Small Cap index is trading down 5.1%. The rupee is trading at 67.71 to the US$.

The outcome of some micro and macroeconomic data will keep Indian share markets busy today. Most of volatility will be due to the release of September quarter earnings announcements by Indian companies. As per an article in the Economic Times, as many as 33 companies are going to announce their September quarter results today.

As always, there would be analyst reports on companies that provide estimates on the quarterly financial performance. And market participants will gear up to invest in stocks that will gain most of the fad.

That's the case every time. Estimates and even the actual corporate earnings every quarter tends to be a major influence on investor sentiments. The company's under or outperformance is immediately reflected in market movements. If the company beats street expectations, the stock takes off like a rocket. On the other hand, if the company miss analyst's forecasts by even a small amount, the stock is trashed.

In all, these announcements put investors and stock markets into a frenzy. So the question then comes as: What can one do in order to sail safe during such times?

Being Warren Buffett fans, we think the best way to counter this volatility is to follow a long term value investing approach.

Investors should keep in mind that quarterly results are just short term events. They do not reflect the long term picture of the company. The picture painted by quarterly results may be gloomy that can lead short term investors into a state of panic.

On the other hand, value investing is contrarian in nature. It evaluates stocks on the basis of their long term performance. It is more businesslike in its approach. And we believe retail investors would do themselves a world of good if they pay more attention to this aspect of investing.

As far as our outlook over the long term is concerned, we believe that the benchmark indices can go up as much as 70% in the next two-to-three years. And Tanushree Banerjee, co-head of research at Equitymaster, recently reaffirmed this claim and stated that the 70% earnings upside extends well beyond Sensex.

Here's a snippet of what she had written-

  • Plenty of blue-chip stocks outside of the Sensex can fetch earnings growth in excess of 15% per year over the next three years. But if earnings were to grow at 15%, and if profit margins were to rise to their ten-year average of 11% from the current 9.6%, an EPS of Rs 100 can become Rs 174 by FY19. Which means an upside of 74%.

Our StockSelect team is already on the lookout for opportunities in such blue-chips. Subscribers can expect recommendations from the StockSelect team, as and when these blue chip stocks offer opportunity to invest. So do keep an eye out for updates from our end.

Apart from the above, market participants will keep an eye on the draft model of Goods and Services Tax (GST) law that is going to be announced today. As per the news, the Centre is going to share the draft model GST law with the states today.

Reportedly, the Centre is working on multiple options apart from horizontal and vertical division for deciding on jurisdiction over tax assesses.

Earlier this month, the government finalised the tax rates for GST. The development came as the GST Council decided upon a multi-layered tax rate system. The Council finalised a four-tier tax structure, with the tax rate on items of mass consumption at 5%. Other slab rates decided by the Council are 12%, 18%, and 28%. To know more on this, please read one of our previous stock market commentaries here. Also, to get a detailed view on the Goods and Services Tax (GST), you can read Vivek Kaul's report titled GST & You: What the Media DID NOT TELL YOU About the GST.

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

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Mar 23, 2018 (Close)