(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:
- Private banks losing appeal
- Bond market lack catalysts
- Fast-food chains struggle
Good morning, this is Alex Gabriel Simon, an equities reporter in Mumbai. Stock traders look set for a bounce, helped by buoyant global markets as they return after Thursday’s holiday. Data coming in from the US has bolstered expectations of a rate cut in September, which could help the Nifty breakout of weekslong consolidation zone.
Private banks are losing their appeal
After betting on the private lenders for most of the year, mutual fund managers are becoming bearish. As of the end of July, these lenders made up just 16.1% of mutual funds’ equity assets — a six-year low — according to Motilal Oswal Securities. This is down from more than 17% in June. Overseas investors also sold about $1 billion in financial services shares in the last two weeks of July. With the earnings outlook weak due to narrowing margins, private bank stocks may continue to disappoint.
Bond rally stalls as catalysts dwindle
From inflation easing to the government maintaining low borrowing and higher foreign investor demand due to index inclusion, most positive triggers for local bonds have materialized. That’s led to yields falling more than 30 basis points this year, pushing up against 6.85% — a level below which they haven’t closed since March 2022. However, even the most bullish bond investors are skeptical about further gains, with 6.85% likely serving as a floor unless the RBI signals a shift to a neutral stance.
Domino’s, KFC India chains face sluggish sales
Consumer spending in India continues to be weak, going by recent trends at fast-food restaurant chains. In the June quarter, nearly all quick-service brands recorded a drop in per-store daily average sales compared with the year-ago period, according to a Citi note. While stubbornly weak sentiment suggests near-term earnings will be volatile, stocks like Jubilant Foodworks, which runs the local franchise of Domino’s Pizza, and KFC India operator Devyani International could benefit significantly when discretionary spending rebounds, the note said.
Analysts actions:
- Ola Electric Rated New Buy at HSBC; PT 140 rupees
- Ipca Lab Cut to Reduce at Dolat Capital; PT 1,420 rupees
- Nazara Tech Cut to Underperform at Jefferies; PT 720 rupees
- NLC India Raised to Buy at Batlivala & Karani; PT 318 rupees
- Rainbow Medicare Cut to Hold at HSBC; PT 1,290 rupees
Three great reads from Bloomberg today:
- Carry Trade That Blew Up Markets Is Attracting Hedge Funds Again
- Binance Restarts India Business After Getting Local Registration
- Divergence on BOJ Policy Emerges Among PM Candidates in Japan
And, finally..
The lackluster performance of Indian equities in recent sessions may be coming to an end. Although domestic catalysts are limited, prospects of interest rate cuts in the US should offer some support. Additionally, the 14-day Relative Strength Index, a key indicator of market momentum, is set for a leg up. The Nifty 50 index’s RSI is current around the 40-mark, a level that has consistently served as a strong base for rebounds over the past year.
--With assistance from Ronojoy Mazumdar.
©2024 Bloomberg L.P.
