Indian Indices Continue Downtrend; Realty Stocks Bleed

Mon, 21 Nov 11:30 am

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

The BSE Sensex is trading down 325 points (down 1.2%) and the NSE Nifty is trading down 122 points (down 1.5%). Meanwhile, the BSE Mid Cap index is trading down by 2.4%, while the BSE Small Cap index is trading down 2.8%. The rupee is trading at 68.25 to the US$.

Last week proved to be volatile for the financial markets across the globe. The comments by the US Fed for an interest rate hike in December and the surprise bond purchase programme by the Bank of Japan (BoJ) were the reasons behind this volatility. The effects of these events will be felt during this week as well.

Central banks across the world are trying to prod growth with the help of stimulus measures and near-zero or negative interest rates. This is seen because many nations today are struggling through a period of low to no growth. The reasons are many - ranging from central bank policies, deleveraging, and demographics. The average consumer is saddled with large debts and is looking to pay them off. This means a lower outlook for growth. This low growth scenario is one of the reasons for all the scrutiny over interest rates.

The global economic system is a giant Ponzi scheme needing more debt at the base to support the apex. The cracks of this Ponzi scheme are starting to appear: European banks, US corporate defaults, a realisation that negative rates are not working, earnings downgrades in the US... The system is so unstable it may only take the flap of a black swan's wing to send it all crashing down.

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Back home, Indian indices are also said to witness volatility on the back of announcement of September quarter earnings. As many as 54 BSE-listed companies are set to declare their September quarter results during this trading week.

The effect of these result announcements would be seen during the trading week. As always, there would be analysis reports on companies that provide estimates on the quarterly financial performance. And market participants will gear up to invest in stocks that will gain the 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 volatile times?

The Microcap Millionaires (MCM) team is of the view that the current market volatility can provide you with opportunities to make few yet far more profitable investments. The team has just put together a report that summarizes the top stocks that they think every new subscriber should make a part of the equity portion of the MCM group of stocks. Therefore, if you are starting out, there's no better stocks to start your wealth building journey through Microcap Millionaires than the ones covered in this report.

Apart from these developments, Prime Minister Narendra Modi recently stated that his government's demonetisation drive will push banks to cut lending rates significantly. Speaking at a BJP rally in Agra, Modi said that, "Over Rs 5 lakh crore deposited with banks are not going to be kept idle. Banks will have to extend loans for all sorts of economic enterprise, for which they will have to bring down their interest rates."

We believe, the demonetisation move by the government is a step in the right direction. From a long term perspective, the increased flow of money into the banking system would mean more loans extended by banks to the general public. In order to stimulate lending, banks may indeed reduce interest rates. If this happens to, there would be increased spending and an overall boost for the Indian economy.

Also, from a big picture perspective, the decision to ban 500 and 1000 denomination notes is certainly a move in the right direction. Along with the GST roll out, it will certainly give a big fillip to the India's growth story.

Vivek Kaul has written an excellent piece explaining why Mr Modi banned the Rs 500 and Rs 1,000 notes. Here, Vivek offers some economic as well as political logic to the decision. Also, to get a detailed view of the demonetization move, please read the recent issue of The Vivek Kaul Letter (requires subscription).

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Indian Share Market Update: Top Gainers and Losers