Published on October 29, 2013
10 Factors that Influence the Demystifying Stocks Market during Diwali
Shubh Muhurat • It is time to gear up for Muhurat Trading. On Diwali, stock exchanges allow special trading for a brief amount of time, usually an hour, as homage to Lakshmi. The day also marks the start of a new Hindu financial year called Samvat, and is considered auspicious for trade. • However, utmost care should be taken while trading. Here are some factors to take into consideration.
Growth • If the economy slows, companies feel the pressure. This is, therefore, one of the biggest factors to keep in mind while trading. • During such times of slow growth, it is better to prefer stocks which see less impact or have a significant presence in foreign markets.
Rupee • Indian companies depend on imports for raw materials. These are purchased in a foreign currency. Hence, any fall in the Rupee’s value makes imports costly. This directly or indirectly affects profitability. • However, export-oriented companies like IT services actually benefit from a Rupee fall as they earn in foreign currencies.
Inflation • Prices of goods increase over a period of time. This is called inflation. With high inflation, companies incur more costs and are forced to hike prices. • This, however, affects demand. Inflation is, thus, a double-edged sword. It impacts companies and consumers alike.
Interest Rates • To curb inflation and Rupee’s fall, the RBI keeps interest rates high to curb the money supply in the system. • This means loans turn costly. But, it eventually affects demand and thus slows growth. • Investors thus prefer a low interest rate regime.
Monsoon • India has a vast rural population, which benefits from a good monsoon. This increases spending in rural areas, which translates to high demand. • Tractor and two-wheeler makers and consumer goods sector stocks often cheer a good monsoon.
International Prices • India being an import-dependent nation, international price of raw materials, especially oil, is important. • Fuel prices affect everyone. It is, thus, an important factor to keep in mind.
US Quantitative Easing • What happens in the US affects the whole world, including India. The US central bank – Federal Reserve – buys back bonds from the market to infuse money as part of Quantitative Easing. • This money flows into emerging markets like India as foreign investment. It buoys stock markets and helps companies get funds. • Any cut in the bond-buying will impact India. The Fed has not indicated when it will start the cut, but it is widely expected to happen early next year.
Company Financials • The company’s balance sheet will help you understand how profitable it is, and will be going forward. • Never bet on a stock without a thorough background check on the company.
Track Record • Compare the performance of a stock over a period of time, typically five years. It reflects the confidence of other investors in the company. • That said, track record should not be the sole judge. Just because a company jumped 10-fold in the last five years, does not mean it will do so in the next five years to come.
Peer Comparison • Also compare the performance of a company with its competitors in the sector. That will help understand the company’s prospects better.
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Disclaimer: Kotak Securities Limited, Registered Address: 27 BKC, C 27, G Block, Bandra Kurla Complex, Bandra (E) Mumbai 400 051. Correspondence Address: 6th Floor, Kotak Infinity, Building No. 21, Infinity Park, Off Western Express Highway, General AK Vaidya Marg, Malad (East), Mumbai 400097. Tel no: 66056825. SEBI Registration Numbers: NSE INB/INF/INE 230808130, BSE INB 010808153 / INF 011133230, OTC INB 200808136, MCX-SX INE 260808130/ INB 260808135/INF 260808135 , NSDL IN-DP-NSDL-23-97, CDSL IN-DP-CDSL-158-2001, AMFI ARN 0164. Compliance Officer - Mr. Sandeep Chordia. Tel. No: 022 6605 6825. Email id: email@example.com. In case you require any clarification or have any concern, kindly write to us at below email ids: • For Trading Account related queries: firstname.lastname@example.org • For Demat Account related queries: email@example.com. • • Alternatively, you may feel free to contact our customer service desk at our toll free numbers 18002099191 or 1800222299. You may also call at 30305757 by using your city STD code as a prefix. In case you wish to escalate your concern / query, please write to us at firstname.lastname@example.org and if you feel you are still unheard, write to our customer service HOD at email@example.com.
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