This is a Guest Post by AK of Fallible
AK has been an analyst at long/short equity investment firms, global macro funds, and corporate economics departments. He co-founded Macro Ops and is the host of Fallible.
AK speaks with Tyler of Macro Ops all about how important it is to avoid overtrading in the market. We also cover tactics you can use to prevent yourself from making this mistake. Make sure you watch the video above for the full conversation!
Benchmark indices extend their losses in Friday’s last-hour trading session, dragged down by heavyweights like HDFC twins and Reliance Industries.
The S&P BSE Sensex dipped 372 points, or 0.94 per cent, to 39,229, with YES Bank, Maruti Suzuki, Sun Pharma, HDFC, and Hero MotoCorp leading the list of losers. The broader Nifty50 index slipped 97 points, or 0.82 per cent, to 11,734.
All the NSE sectoral indices except Nifty PSU Bank indices were trading in the red. Nifty Pharma and Nifty Auto indexes, down 1.5 per cent each, took the deepest cuts.
In the broader market, the S&P BSE MidCap index was trading 92 points, or 0.63 per cent, lower at Rs 14,588, while the S&P BSE SmallCap gave up its early gains to trade 13 points, or 0.09 per cent, lower at 14,052.
A selloff towards the fag end of Friday’s session dragged the benchmark indices lower after a range-bound trade for most part of the day.
Reliance Industries and banking stocks remained the top drags for the indices with the Bank Nifty dipping 1.17 per cent.
The benchmark S&P BSE Sensex ended 289 points, or 0.73 per cent, lower at 39,452, after touching an intra-day low of 39,363. Only five out of the 30 BSE constituents ended the day in the green, with IndusInd, Bharti Airtel, Kotak Bank, Axis Bank, and Tata Motors taking the deepest cuts.
The broader Nifty50 index tumbled 91 points to 11,823. About 808 shares advanced, 1686 shares declined, and 144 shares remained unchanged on the NSE.
On a weekly basis, both the Sensex slipped 0.5 per cent each.
All the Nifty sectoral indices ended Friday’s session with losses. Nifty Realty, down 2.1 per cent, was among the top losers, while Nifty Bank,Nifty Auto, Nifty FMCG, and Nifty Private Bank all slipped over 1 per cent.
In the broader market, the S&P BSE MidCap index was down 1 per cent to 14,721, while the S&P BSE SmallCap ended the day 110 points, or 0.76 per cent, lower at 14,366.
In 14 points to keep in mind when buying small-cap stocks, I threw light on what one must look at specifically and diligently.
While, I am not undermining the importance that must be given to facets such as industry growth, company growth, return ratios, profitability, cash flows and debt, I would like to present a broader perspective too.
Experienced investors will not only scrutinise all of the above, but also look at potential trigger or what could provide a supportive growth environment.
Let’s look at some of them.
1. Next-Gen
Keep a track of when the next generation takes over. More often than not, the next-gen are educated from Ivy league institutes, work for renown investment banks/consultancies globally for a few years before heading back to join the family business in India. This is not just a formal transfer of responsibility, but the birthing of a culture that realizes the importance of clean corporate governance and the upside it gives to valuations.
You can see it evident during the recent past in some companies such as a leading tyre manufacturer, glassware producer and an iconic automobile player.
2. Entrepreneurs
Keep an eye out for entrepreneurs who take over a listed shell company or a very small operating company or a loss-making company. They buyout the existing promoters, make mandatory open offers to the public and once in control of the company, they come up with a strategy to turn it around.
This has recently been noticeable; a Harvard graduate taking over a forestry related company, a pipe company promoter taking over such companies to diversify in related fields.
Benchmark indices ended Friday’s volatile session with marginal gains, lifted by HDFC twins and bank stocks amid weakness in pharma counters.
The S&P BSE Sensex rose 86 points, or 0.2 per cent, to 39,616, with IndusInd Bank, Bajaj Finance, Mahindra & Mahindra, State Bank of India, and ICICI Bank being the top gainers. Only 12 of the 30 BSE constituents ended the day in the green.
The broader Nifty50 index added 27 points, or 0.23 per cent, to 11,871. About 1058 shares advanced, 1390 shares declined, and 146 shares remained unchanged on the NSE.
The Nifty sectoral indices traded mixed, with Nifty Fin Service index gaining the most 0.9 per cent, while the Nifty Pharma index slipped the most 1.2 per cent.
In the broader markets, the S&P BSE MidCap index dipped 25 points, or 0.17 per cent, to 14,906, while the S&P BSE SmallCap index was down 16 points , or 0.1 per cent, to 14,657.
After reclaiming the crucial 40,000 and 12,000 levels, respectively in the early deals, the benchmark indices S&P BSE Sensex and Nifty50 index turned volatile in the afternoon session.
The S&P BSE Sensex ended at 39,714, down 118 points while the broader Nifty50 index settled at 11,923, down 23 points.
The S&P BSE Sensex was trading 132 points or 0.33 per cent lower at 39,700 levels while the NSE’s Nifty50 index was quoting 33 points or 0.28 per cent lower at 11,913 levels. Nifty Bank saw a swing of 1,200 points during the session. Volatility index India VIX was trading over 4 per cent higher at 16.24.
Sectorally, barring IT and FMCG counters, all the indices were trading in the red with the Nifty PSU Bank index taking the hardest knock, followed by media and realty stocks. The Nifty PSU Bank index was trading nearly 2 per cent lower at 3,232.50 levels.
In the broader market, the S&P BSE MidCap index was trading flat at 15,070 levels while the S&P BSE SmallCap index was ruling at 14,876, down 88 points or 0.59 per cent.
Putting rest to all speculation, the President of India on Friday released the portfolio details of new Cabinet, a day after Narendra Modi took oath as the country’s 16th Prime Minister. There were expectations that Amit Shah, a seasoned stock broker and a key architect of NDA’s victory for the second consecutive time will be handed over reigns of the Finance Ministry. This is after Arun Jaitley expressed his desire to stay away from any role in the new government citing health reasons. However, Nirmala Sitharaman has been appointed the new Finance Minister, while Amit Shah will handle the Home Ministry. Smriti Irani, who was expected to be awarded handsomely for defeating Rahul Gandhi in Amethi, has been made the Minister of Women and Child Development and Minister of Textiles.
The benchmark indices ending Friday’s session at record closing highs, after investors’ optimism was boosted by Narendra Modi-led National Democratic Alliance (NDA’s) return to power the previous day. While the gains were across the board, bank stocks and financials made the highest contribution to the indices’ rise.
The S&P BSE Sensex ended the day 623 points, or 1.6 per cent, higher at 39,435, with ICICI Bank, Larsen & Toubro, Bharti Airtel, Vedanta, and Tata Motors leading the list of gainers. Oout of the 30 BSE constituents, only Hindustan Unilever and NTPC ended the day in the red.
The broader Nifty50 index rose 187 points to settle at 11,844. About 1823 shares advanced, while 676 declined, and 150 shares remained unchanged on the NSE.
This was the benchmark indices’ biggest weekly gain in 2019.
India VIX, a measure of volatility in Nifty, slipped 40 per cent in the last two days, registering its biggest 2-day fall in five years.
In the broader market, the S&P BSE MidCap index jumped 295 points, or 2 per cent, to hover at 14,945 levels, while the S&P BSE SmallCap closed at 14,670 levels, up 347 points, or 2.4 per cent.
All the Nifty sectoral indices ended the day with gains, with Nifty PSU Bank gaining the maximum 5.6 per cent, while Nifty Realty also rose 4.4 per cent.
Sensex and Nifty surged on the final day of a volatile week on Friday with both the benchmark indices gaining over a per cent each ahead of exit polls outcome on Monday.
Kotak Mahindra, ICICI Bank, HDFC twins, and ITC were the biggest contributors in Sensex’s march to the north.
The benchmark Sensex zoomed almost 1.5 per cent, up 537 points, to close at 37,931, with Bajaj Finance, Hero MotoCorp, Maruti Suzuki India, Kotak Bank, and Bajaj Auto registering the biggest gains. Market breadth remained in favour of buyers with the advance-decline ratio at 3:2.
The broader Nifty50 also surged 1.33 per cent, or 150 points, to end the day at 11,407. About 1,029 stocks advanced and 723 shares declined on National Stock Exchange.
Among sectoral indices, only three indices remained in the red, with Nifty Media gaining the highest 3.53 per cent. Nifty Bank, Nifty Auto, Nifty Finance Service, Nifty FMCG and Nifty Private Bank all rose more than 2 per cent.
In the broader market, the S&P BSE MidCap gained 153 points, or 1.08 per cent, at 14,308.36, while the S&P BSE SmallCap also rose 70 points, or 0.51 per cent, at 13,887.
Benchmark indices ended Friday’s volatile session in the red, thus recording fall for the eighth straight day and third consecutive week, as investors remained cautious ahead of the US-China trade negotiation outcome.
India VIX was up almost 4 per cent to 26.49
The benchmark S&P BSE Sensex ended the day 96 points, or 0.26 per cent, lower at 37,463, with Tata Consultancy Services (TCS), HCL Tech, Tata Steel, IndusInd Bank and Infosys contributing the most to the indices’ fall. Twenty-one of the 30 constituents of BSE ended the session with losses.
The broader index Nifty50 gave up the crucial 11,300 mark and slipped 23 points, or 0.20 per cent, at 11,279. About 1,187 shares advanced, 1,270 shares declined, and 162 shares were unchanged.
Among sectoral indices, both Nifty IT and Nifty Metal dipped more than 1 per cent. However, Nifty PSU Bank gained 2.5 per cent, the highest among the gainers.
The broader indices fared better than their benchmark peers with the S&P BSE MidCap index ending 34 points, or 0.24 per cent, higher at 14,390, while the S&P BSE SmallCap index was ruling at 14,106, up 29 points or 0.21 per cent.
Benchmark indices ended Friday’s session with marginal cuts after erasing its intraday gains in the final hour. IT stocks remained subdued throughout the day after the US-based IT services company Cognizant nearly halved its 2019 growth guidance.
The intra-day rise in the indices was spurred by a slip in oil prices with financial stocks gaining the most, before the indices retreated to trade flat in the end.
S&P BSE Sensex settled 18 points lower for the day at 38,963, with TCS, Hindustan Unilever, TATA Steel, HCL Tech and Infosys being the top drags. Twelve out of the 30 constituents of the BSE ended the day in red.
The broader Nifty50 was also down 12.5 points, or 0.11 per cent, to end at 11,712 levels. The market breadth was tilted in favour of declines. About 1,031 stocks fell and 702 shares advanced on National Stock Exchange.
Among sectoral indices, the Nifty IT index was the biggest loser, down almost 1.9 per cent while the Nifty FMCG index also slipped 1.13 per cent. On the other hand, Nifty Realty index and Nifty PSU Bank index gained 1.57 per cent and 1.09 per cent, respectively.
On a weekly basis, the S&P BSE Sensex closed 0.27 per cent lower while and the NSE Nifty50 slipped 0.36 per cent. This was the indices’ biggest weekly loss since February 11.
The volatility index, VIX, ended the day 4.35 percent higher at 23.98.
The broader market took the cue from benchmark indices to end flat. The S&P BSE MidCap index slipped 15 points, or 0.10 per cent, at 14,783, while the S&P BSE SmallCap index ended the day at 14,548, down 45 points, or 0.31 per cent.