Bears in action

The equity market had a humbling week as the indices ended red on Friday. The fear of the new COVID-19 Delta variant rapidly spreading throughout the Asia Pacific region plays a significant role in crushing the positive sentiments of the markets. Sensex was at 52484.67 (-0.83%), and Nifty was at 15722 (-0.87) at the end of the week on Friday, July 2.

Nifty Pharma had a stellar week despite the entire market going down throughout the week; the index was up 3.27% by the end of the week. Stocks in the index such as Divi’s Labs and Laurus Labs went up by 6.51% and 4.18%.

Nifty FMCG (Fast Moving Consumer Goods) also had a good week as the index was 0.58% on Friday. Stocks such as Hindustan Unilever have performed well in the past week and were up by 1.22% on Friday.

India Vix, the volatility index based on Nifty, was down at 12.09 (-10.24%), showing a significant decrease in volatility for yet another week.

Nifty Metal was among the top underperformers of the week as the index took a 2% hit and was down at 5130 for the week. Stocks such as Tata Steel and JSW Steel were down 2.65% and 2.16% respectively.

Spotlight

Union Finance Minister Nirmala Sitharaman addressed a press conference on Monday June 28, 2021, where she announced eight relief measures out of which one is specifically related to the healthcare infrastructure of the county. The finance minister eight more loan guarantee schemes for most affected sectors by COVID-19 to boost trade and employment. The scheme will provide all these sectors with a lump sum amount of Rupees 1.1 lakh crore out of which 50000 cr will be allotted to the healthcare sector. In addition to the 1.1 lakh crore the government will also provide 1.5 lakh crore as Emergency Credit Line Guarantee Scheme (ECLGS).

Outlook for the next week

We saw the markets turn green by the end of the week on Friday, showing the sign of bulls returning to the markets. However, we would suggest you remain cautious as we will be looking at some economic data that will provide us with inflation numbers and Industrial production. These numbers might result in markets turning volatile. Given the recent data on vaccinations and at the rapid pace at which the vaccination is going and with a decline in COVID-19 cases we expect the market to be positive for the coming week.

Good to know

What is the Price to Earnings or PE ratio?

PE ratio is one of the most used tools by investors to determine a stock’s value and identify over or undervaluation. It also helps investors to consider a stock for long-term aspects.

PE ratio is used for finding the relative value of a company’s share. It relates the company’s share price to its earnings per share or EPS.

The formula for PE ratio:

P/E Ratio= Earnings per Share/Market value per share​

There are two kinds of PE ratios: Forward and Trailing.

Forward PE is used to compare the company’s current earnings to the company’s future earnings to get guidance for the future.

Trailing PE is used on past performances where we relate the company’s current price to EPS of the last 12 months. It gives investors a clear picture to make an investment decision.

Chaitanya Chaman
Chaitanya is currently a research intern with Econfinity. He is a finance and investment enthusiast with two years of experience in investment management.