(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:
- Earnings dampener
- Charts flashing caution
- Ola’s valuation challenges
Good morning, this is Chiranjivi Chakraborty, an equities reporter in Mumbai. Indian equities eked out another record close, with the Nifty missing the 25,000 milestone by a whisker. While this should broadly support the risk-on mood, we need strong earnings to justify the sky-high valuations. For now, a slew of major central bank decisions globally this week will likely turn investors’ focus on domestic interest rate-sensitive sectors, including lenders.
Earnings are failing the vibe check
This earnings season is dampening the otherwise ecstatic mood in India’s stock market. For those who still pay attention to the fundamentals, it’s a trend worth noting. Out the 29 companies from the Nifty 50 Index that have posted earnings so far, more than 55% missed the average analyst estimate, data compiled by Bloomberg show. That’s a sharp slowdown from the previous three months, where 62% of firms beat expectations. Interestingly, over 70% of firms are beating sales estimates, indicating that rising input costs are starting to squeeze profits.
Technical indicators hint at possible downturn
The big question on everyone’s mind is: how long will Nifty’s record run last? So far, there’s no sign that the bulls have overstayed their welcome. But if you are into technical analysis, you might want to check out the number of Nifty 50 stocks above their 200-day moving average. Right now, 90% of them are above that mark, which in the past has often presaged short-lived downturns. Plus, the weekly relative strength index for the gauge is nearing 80. The last time it hit that level was right before the sharp correction in October 2021.
SoftBank-backed Ola faces valuation challenges in IPO
Ola Electric’s $734 million IPO is set to be India’s biggest offering so far in 2024 and the first ever by an EV company in the country. As India’s largest e-scooter maker, backed by big names like SoftBank, Ola’s market debut is a major event for the booming capital market, which has been one of the hottest globally this year. But here’s the twist: the company is still losing money, and the IPO values it at $4 billion — way less than the founder was aiming for. Additionally, the price band is below what some early investors, who are cashing out, have paid on average for their holdings.
Analysts actions:
- Bajaj Finance Cut to Accumulate at Way2Wealth Brokers
- Finolex Industries Cut to Hold at Investec; PT 345 rupees
- ICICI Prudential Cut to Hold at KR Choksey; PT 750 rupees
- JK Cement Raised to Accumulate at Way2Wealth Brokers
- Kaynes Technology India Cut to Accumulate at Elara Secs India
- Mahanagar Gas Raised to Buy at Elara Secs India; PT 2,219 rupees
- SBI Cards Raised to Reduce at Elara Secs India; PT 719 rupees
Three great reads from Bloomberg today:
- Modi’s Tax Plan Is Squeezing the Middle Class: Andy Mukherjee
- Samsung Begins Closing Gap in Making AI Memory Chips for Nvidia
- Big Take: Facing Ruin, Japan’s Firms Relearn How to Raise Prices
And, finally..
Indian bond yields hit their lowest since April 2022 on Monday, helped by expectations that Fed Chair Jerome Powell might hint at upcoming rate cuts in this week’s FOMC meeting, and domestically by the proposed liquidity rules for banks that could boost demand. There’s a cloud over that now, though, after the Reserve Bank of India said foreign investors will no longer be able to freely buy freshly issued government bonds with 14-year and 30-year tenors, signaling wariness on the part of authorities about potential hot money flows.
--With assistance from Ashutosh Joshi and Ronojoy Mazumdar.
©2024 Bloomberg L.P.
