(Bloomberg) -- Before the trading day starts we bring you a digest of the key news and events that are likely to move markets. Today we look at:
- Asset sales are back
- Banks face asset quality concerns
- Rural index is latest thematic gauge
Good morning, this is Ashutosh Joshi, an equities reporter in Mumbai. Traders are looking at a slightly better end to the week, with equities showing signs of recovery across Asia. Earlier this week, investor enthusiasm took a hit from the budget’s tax hikes on equities trading and the lousy weather. But things have started to pick up in the broader markets. Now, traders are hoping that next week’s Federal Reserve meeting will spark an equities comeback.
Asset sales are back in the spotlight
The government is looking at asset sales as a way to manage the fiscal deficit while still investing in infrastructure and supporting allies. That’s once again putting the spotlight on generate revenue beyond taxes. With state-run firms trading above historic valuations and elections now behind us, it seems like progress is being made in selling some of these assets. A stake sale in IDBI Bank is in the advanced stages, and there are plans to trim holdings in Hindustan Zinc.
Banks face renewed asset quality concerns
A concerted effort to clean up India’s banking system pushed non-performing assets to a decadal low last year. However, signs of deterioration in asset quality have emerged in the current earnings season. For instance, Axis Bank’s shares slumped after analysts flagged higher delinquencies following its first-quarter results. Similar trends were seen in other lenders, including RBL Bank and CreditAccess Grameen. Most investors don’t currently view this as a structural issue in the sector, but recent trends surely warrant close monitoring.
Rural index is the latest thematic offering
The NSE has been busy rolling out thematic indexes, with the newest one being the Nifty Rural Index of firms that generate significant revenue from rural areas. Thematic indexes are now direct investment tools, with ETFs targeting niche investment ideas ranging from defense to electric vehicles. Just in June, funds in this category and sectoral funds took in 130 billion rupees in inflows. That’s led to a flurry of new funds focused on themes like manufacturing and special opportunities.
Analysts actions:
- Axis Bank Cut to Neutral at Goldman; PT 1,303 rupees
- Federal Bank Cut to Hold at Sunidhi Securities & Finance Ltd
- Ganesha Ecosphere Rated New Buy at Dalal & Broacha
- Vedanta Resources Ltd Upgraded to B- by S&P
- Wipro Cut to Reduce at KR Choksey; PT 497 rupees
Three great reads from Bloomberg today:
- ‘Crazy’ Yen Rally Is at Risk of Shattering as Soon as Next Week
- Markets Tear Up Popular Trades That Reached ‘Stupid Levels’
- Big Take: Harvard’s $13 Billion Tax-Free Property Irks Critics
And, finally..
Shares of Mahanagar Telephone Nigam have skyrocketed, turning the struggling state-owned operator into a star performer on the bourses. The stock has jumped about 70% in the past six sessions after the government forked out 936 million rupees to cover the company’s bond interest, avoiding a default. This rally could keep going since the government has promised to service all future bond payments, according to a person familiar with the matter. That’s prompted tactical punters to start seeing bad news about the company as good news.
--With assistance from Alex Gabriel Simon and Divya Patil.
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