Stock Market Highlights: Sensex ends 87 pts lower as market slips from one-month highs — rupee hits record low

Remain positive on IT services: Hemang Jani 

Hemang Jani of Motilal Oswal Financial Services remains positive on IT services. “People are slightly disappointed with the numbers though they were in line on the revenue front. The sense one is getting is that after a third quarter of pressure on margins, one is not really sure exactly at what point this will bottom out. Though the management commentary is positive, there is fear that maybe depending upon how the situation unfolds over the next few months, you might see some disappointment in terms of deal flows,” he tells CNBC-TV18.

However, after a correction of almost about 25-30 percent from the top, people will eventually want to get into this space given that all the companies are stable with good cash flow, he says.

Why you should invest in stocks of companies related to commodity prices

If you are not comfortable investing in commodities, where one can take bets mostly through futures, investing in a ‘related’ commodity stock can be a good option. Data show that commodity price movements have a multiplier effect on related stocks. This means if a commodity moves up by, say, 10%, the stock of the company engaged in manufacturing or processing it rises by more than 10%.

This is because while the production cost remains the same, revenues rise (due to high commodity prices), increasing the operating profit (revenue minus cost), which in turn pushes up the stock price.

“Earnings of metal companies have a 1.5-1.8x sensitivity to metal prices,” says Kishore Narne, associate director and head, commodity and currency, Motilal Oswal Commodities, says,

The commodity stocks we are talking about could be that of a mining or manufacturing company such as Tata Steel and Steel Authority of India Ltd (steel makers), Sesa Goa (iron ore mining), Hindalco, Nalco and Sterlite (aluminium mining), Cairn India and ONGC (oil & gas exploration).