Look For Stocks Re­port­ing Stel­lar Per­for­mance But Val­ued Cheaply

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Af­ter the aus­pi­cious oc­ca­sion of Di­wali failed to lure the in­vestors, the other ma­jor event that in­vestors should keep an eye on is the Q2FY19 earn­ings. We are now al­most com­ing to the end of sec­ond quar­ter’s earn­ings sea­son. All the 50 con­stituents of Nifty have re­ported their quar­terly num­bers and the over­all net sales for the quar­ter surged al­most 24 per cent from the cor­re­spond­ing quar­ter of the pre­vi­ous fis­cal, but on the earn­ings front, Nifty 50 stocks re­ported merely 4 per cent growth from the cor­re­spond­ing quar­ter.

Hence, we urge our in­vestors to take in­vest­ment de­ci­sion af­ter thor­ough anal­y­sis of in­di­vid­ual stocks as, in the end, it comes down to the earn­ings, which drive the stock prices in the long run. Com­ing back to Nifty 50 earn­ings, how­ever, the few stocks such as Grasim, Tata Mo­tors and Sun Pharma spoiled the party by re­port­ing net losses in the quar­ter, mostly due to one-time loss.

In terms of macroe­co­nomic fac­tors, the south­ward move­ment of Brent crude oil prices gives big re­lief to im­port- de­pen­dent In­dian econ­omy and, as a re­sult, the In­dian ru­pee strength­ened against the US dol­lar and touched the 72-mark against the USD. How­ever, on Mon­day, the Saudi En­ergy Min­is­ter Khalid Al-Falih said that pro­duc­ers need to cut around one mil­lion bar­rels a day from Oc­to­ber pro­duc­tion lev­els. The pro­duc­tion cut of OPEC and its part­ners and the in­creas­ing US oil in­ven­to­ries would lead to un­cer­tainty in oil prices go­ing for­ward.

Fur­ther, to ease tight liq­uid­ity sit­u­a­tion trig­gered by the IL&FS de­fault, the coun­try’s cen­tral bank RBI will in­fuse Rs 12,000 crore into the sys­tem through pur­chase of gov­ern­ment se­cu­ri­ties un­der open mar­ket op­er­a­tions on Novem­ber 15. Be­sides, one more thing that might act as a cush­ion in this volatile mar­ket is con­tin­u­ous eas­ing of In­dia’s con­sumer price in­dex in­fla­tion. In­dia's CPI in­fla­tion tracked by Re­serve Bank of In­dia stood at 3.31 per cent for the month of Oc­to­ber as against 3.70 per cent in Septem­ber. This can be at­trib­uted to mod­est in­fla­tion for key food items, which con­tin­ues to keep re­tail in­fla­tion below the RBI’s tar­get.

On the global front, if there is favourable out­come from trade talks between China and the US, then the Asian mar­kets would be the clear win­ners.

As said ear­lier, the out­come of state elec­tions will be one of ma­jor trig­gers for the mar­ket, as the mar­ket par­tic­i­pants are likely to take cues from this out­come.

With the in­fla­tion con­tin­u­ing to re­main below RBI’s tar­get in­fla­tion and south­ward move­ment of crude oil prices cou­pled with In­dian ru­pee’s come­back from the all-time lows, the RBI’s mone­tary pol­icy com­mit­tee is likely to con­tinue with its sta­tus quo on rates at its De­cem­ber meet­ing. As the well­known fund man­ager Pe­ter Lynch says, “Far more money has been lost by in­vestors pre­par­ing for cor­rec­tions, or try­ing to an­tic­i­pate cor­rec­tions, than has been lost in cor­rec­tions them­selves”. Thus, we urge our in­vestors to look for stocks which are con­sis­tently re­port­ing stel­lar per­for­mance across-the-board and are avail­able at far below their in­trin­sic val­ues.

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