Todays Stock Market Summary Chart of the Day Thursday February 2, 2017

Todays Stock Market Summary Chart of the Day Thursday February 2, 2017

   February 02, 2017       prabhakardalvi

---

Note : Any blog OR content suggestion you have , please mail me on prabhakara.dalvi@gmail.com

The markets reacted strongly with a near 500-point gain for the Sensex yesterday. But how should smart investors react to this budget? The dust settles and we take a closer look at it, one conclusion is unavoidable: Despite all of the speculation, hype, and hoopla in the days leading up to the budget, there's nothing really earth-shattering about it. It's just business as usual on most counts.

Yet, the kind of attention this exercise gets here in India, especially in stock market circles, it is only to be expected that the markets react strongly.

But from personal experience, I can tell you this: For many on D Street, it has become an outright excuse for speculation. The surrounding hoopla makes it difficult for investors to see through it. And easy to believe that they must 'do' something in response to it.

It is at times like these that it is most important to rise above the noise. Make no mistake, it is an important exercise and does affect some businesses more than others. But these differences in most cases are marginal and incremental. And seldom of the 'make or break' variety.

All put together, the annual budget exercise is very much a part of the 'normal' business landscape of companies. The multitude of tweaks made in it either help or harm the cause of a given company ever so slightly. But then again, that's true for all the continuous developments, both global and domestic, throughout the rest of the year.

Its collective approach to stock picking, its devotion to large safety margins in the purchase prices, and its dynamic debt component (fixed deposits/bonds) renders most developments that the economy throws at the business world, government budgets included, trivial.

MCM strategy as a sort of 'Chinese Wall' between the rough and tumble of the business world and our subscribers' returns. It ensures that over the longer term, our returns remain not just protected, but well ahead of the general market's returns.

Chart of the Day  

The Union Budget for 2017-18 was presented by finance minister, Mr Arun Jaitley yesterday. 

The markets seem to give a thumbs up to the budget, the Sensex closed up 486 points for the day. Does the budget play a crucial role for a serious long term investor? What role if any do the valuations play in prospective returns. We looked at the price to earnings ratio of the Sensex on the budget day as a proxy for valuations and noted the following 3 year compounded annual return going forward.

Budget or Not - It is the Valuation That Counts  -       

We found that the market returns are agnostic to the budget in the long run. What mattered more was the valuations at that point in time. Cheap valuations are a big driver of future returns.

Be it the Union Budget, GST or a great monsoon, you always got to ask the all-important question: Everything said and done, am I paying too much for the stock in relation to its intrinsic value?

For even though the budget may be path breaking and the economy may have some great years ahead of it, when you pay too much, even a good stock can quickly turn into a bad investment.

 After opening the day on a flattish note, the Indian stock markets fell below the dotted line. At the time of writing the BSE-Sensex was trading lower by about 42 points (down 0.2%), while the NSE Nifty was trading lower by 15 points (down 0.2%). Sectoral indices are trading on a mixed note with stocks in the metal sector and auto sector witnessing maximum selling pressure.     

                    Today's Investing Mantra         

"Whether we're talking about socks or stocks, I like buying quality merchandise when it is marked down" - Warren Buffett