(Bloomberg) --
Before the trading day starts we bring you a digest of the key news and events that are likely to move markets.
Good morning and happy Monday! This is Chiranjivi Chakraborty, an equities reporter in Mumbai. Nifty futures point to a tepid start to the week after six straight weeks of gains. That said, analysts expect the bullish momentum to sustain as the federal budget approaches. The earnings season will pick up pace this week, with popular names including Jio Financial Services due to report results today.
Trump’s likely return may boost manufacturing stocks
With the so-called Trump trades gaining ground in Asia after the weekend shooting incident, investors will watch out for its implications on emerging markets, particularly the likely escalation of aggressive tariffs on China into a trade war. Countries like India may accelerate their push toward self-reliance, which may benefit stocks in manufacturing and defense sectors, including Hindustan Aeronautics and Dixon Technologies. which have been at the forefront of the ongoing record-setting rally.
Key Nifty earnings this week: will results sustain the rally?
The June-quarter earnings season kicks into full gear this week, with 11 Nifty firms, including Reliance Industries, HDFC Bank and Infosys publishing their results. These companies make up a third of the benchmark index, making this week pivotal in setting the market’s direction for the rest of the month. So far, the Nifty has performed in line with historical trends, up 2% for the month. However, earnings disappointments could quickly alter this picture.
Technical indicator flags warning in small-cap stocks
Spotting signs of the small-cap rally’s end in India has become a favorite pastime for market watchers. At least one technical indicator suggests that this run may be nearing an inflection point. The Relative Strength Index (RSI) on the monthly chart of the BSE’ small-cap gauge is at 83.94, close to levels that have historically preceded steep corrections. However, a caveat remains: this space can stay overheated for longer. During the 2004-2007 bull market, the RSI reached as high as 91.80 before the trend turned.
Analysts actions:
- HCL Tech Cut to Hold at Mirae Asset Securities; PT 1,700 rupees
- Aadhar Housing Finance Rated New Buy at ICICI Securities
- Affle India Raised to Buy at Anand Rathi Securities
- Ambuja Cements Raised to Overweight at Morgan Stanley
- Titan Co Raised to Reduce at HDFC Securities; PT 2,875 rupees
- V-Mart Retail Cut to Add at HDFC Securities; PT 3,200 rupees
Three great reads from Bloomberg today:
- Big Take: Bold and Bloodied Trump Seizes Moment After Being Shot
- Taiwan, India Threaten China’s Top Spot in EM Equity Portfolios
- China Property Crash Is Battering a Niche Pocket of ESG Finance
And, finally..
Foreign banks are buying short-term local bonds, according to Bank of America Corp.’s head of India fixed income. They’ve bought nearly 600 billion rupees ($7.2 billion) across all maturities since the start of June even as state-run banks and mutual funds sold. The preference for these notes underscores their common tactic of managing balance sheets using such instruments. It also points to the fast-moving gyrations in the nation’s fixed income market following JPMorgan Chase & Co.’s inclusion of Indian sovereign bonds last month to its emerging-market index.
--With assistance from Alex Gabriel Simon, Subhadip Sircar and Khushi Malhotra.
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