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China’s Stimulus Woes May Be a Boon for India’s Equity Bulls

(Bloomberg)

(Bloomberg) -- (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:

  • China’s modest stimulus
  • More pain for steelmakers
  • Consumer sector squeezed

Good morning, this is Chiranjivi Chakraborty, an equities reporter in Mumbai. Indian equities are set to open lower this morning, tracking the weakness in Asian markets. Disappointing results from bluechips like Tata Motors have added to weak sentiment, while persistent selling by foreign funds continues to weigh on the market.

China’s stimulus fumble a boon for India bulls

Beijing’s latest stimulus measure underwhelmed China’s stock market. This could be good news for equity bulls in India. With doubts looming about the pace of China’s economic recovery, there’s a chance that the disappointment over the stimulus could slow down the ‘China rotation’ trade. Since October, foreign funds have pulled record amounts from Indian stocks, favoring Chinese shares instead. But now, anyone looking to switch faces a choice between India’s still-expensive valuations and China’s uncertain economic outlook.

More bad news for steel as China’s stimulus disappoints

As if Tata Steel and Steel Authority of India’s guidance on lower selling prices this quarter wasn’t bad enough, the lack of details in China’s latest stimulus measure adds more uncertainty to the sector. The Nifty Metal gauge has already given up more than 9% of its gains after China’s stimulus bonanza late September. With doubts growing over the recovery of world’s largest steel buyer, investors are likely to be wary of buying the dip. 

Consumer firms under pressure too

India’s consumer staple companies aren’t faring much better than steelmakers these days. Already struggling with weak demand in both urban and rural markets, they must now face rising prices for essentials like sugar, dairy, and grains. Once a safe haven in volatile markets, these high-valuation companies are now firmly on the radar of bearish investors. 

Analysts actions:

  • Lupin Raised to Buy at BOB Capital Markets; PT 2,438 rupees
  • Asian Paints Cut to Sell at Goldman; PT 2,375 rupees
  • Cummins India Raised to Buy at Antique Stock Broking

Three great reads from Bloomberg today:

  • Bitcoin Rises Above $81,000 as Token Becomes Totem for Trump Era
  • Swiggy’s $1.3 Billion IPO Is Fueled by 13-Minute Deliveries
  • Big Take: Wall Street Math Wizards Decode Private-Market Returns

And, finally.. 

India’s central bank is ready to let the rupee weaken alongside the Chinese yuan after Donald Trump’s election raised fears about higher US tariffs, according to people familiar with the thinking of policymakers. A weaker yuan will lower the cost of Chinese goods, further widening India’s trade deficit. The Reserve Bank of India plans to allow the rupee to soften while using its ample reserves to prevent a sharp decline, according to the people. Analysts have already revised their rupee forecasts, with HDFC Bank expecting the rupee to hit 85 to the dollar within a year.

--With assistance from Subhadip Sircar, Anup Roy and Kartik Goyal.

©2024 Bloomberg L.P.