(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:
- Hero MotorCorp’s earnings miss
- Railway stocks face reality check
- Bond traders overlook cooling CPI
Good morning, this is Alex Gabriel Simon, an equities reporter in Mumbai. After a week of being stuck in a consolidation pattern, Nifty futures don’t indicate any desire to breakout despite the buoyant mood in Asian markets. Plus, with Independence Day holiday tomorrow, and many aiming to extend the weekend, investors are less likely to chase stocks around today in either direction.
Hero MotoCorp’s earnings flash warning
The automobile industry seems to be heading toward another inventory pileup, similar to the one seen in 2018-2019. Hero MotoCorp’s lower-than-expected earnings, primarily due to a sequential decline in average selling price, suggest that the company may have leaned on discounts to prop up volumes. While this could be a one-off situation influenced by factors like heat waves and general elections impacting the rural market, some analysts are also pointing to rising inventory levels in passenger cars as an emerging risk for the sector.
Railway stocks face reality check
The government’s focus on railways turned several sector-related stocks into multi-baggers, with valuations that often left analysts baffled. Some of that froth has dissipated in recent weeks. Stocks such as IRCTC, Titagarh Rail Systems, IRCON International, and RITES are now trading 15% to 30% below their recent all-time highs. The downside risk might linger, with signs of capital expenditure growth slowing.
Bond market shrugs off cooling inflation, await US data
Bond traders were unimpressed by the CPI inflation, which fell below the RBI’s 4% target for the first time in five years. The 10-year yield dropped by just one basis point, only to rebound by the close. For the market to improve in India, traders will need to see a cooling of inflation in the US, along with more economic data cementing the case for a Fed rate cut next month. Adding to the market jitters is the likely escalation in the Middle East conflict, which has been driving up oil prices.
Analysts actions:
- AIA Engineering Cut to Sell at Equirus Securities Pvt Ltd
- Cera Sanitary Cut to Hold at Asian Markets; PT 9,975 rupees
- Sun Pharma Cut to Accumulate at KR Choksey; PT 1,827 rupees
- Natco Pharma Cut to Reduce at Dolat Capital; PT 1,481 rupees
Three great reads from Bloomberg today:
- Starbucks Looks to India Growth With Tiny Cups, Masala Chai
- SoftBank-Backed Brainbees Soars in Best India Big Debut for 2024
- Ola Electric’s IPO Puts Modinomics to the Test: Andy Mukherjee
And, finally..
Indian stocks are facing their longest stretch of underperformance versus Asian peer, weighed down by price fatigue, a lukewarm earnings season and renewed concerns around the Adani Group. The outlook for stocks to climb higher in the near term appears challenging, given the still-high valuations. Additionally, Nomura Holdings Inc. projects GDP growth to slow to below 7% in the fiscal year to March 2025, as private consumption and capital expenditure struggle. A period of sideways movement in the market looks set to linger.
--With assistance from Ronojoy Mazumdar.
©2024 Bloomberg L.P.
