Look For Stocks Reporting Stellar Performance But Valued Cheaply
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.
Subscribers can send their feedback and queries on technicals portfolio guide to fniedi[email protected]