(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, this is Ashutosh, an equities reporter in Mumbai, where heavy rain isn’t dampening spirits. Nifty futures signal a tepid opening today, as the market takes a breather after a five-week winning streak. It will be a busy week ahead, with IT majors like TCS and HCL Tech kicking off the results season in earnest on July 11. All eyes are on the budget on July 23, with hopes running high for pro-growth policies to sustain the bullish momentum.
Earnings season to begin with profit concerns for Nifty members
India’s biggest companies will kick off the first-quarter earnings season this week after a record-setting stock market rally. However, profits for the Nifty 50 firms are expected to dip 11% from the previous quarter and remain flat from last year, according to Kotak Securities. Antique Stock Broking strategist have excluded commodity, financial, and telecom firms from the index to still project just a 6% profit growth from last year. Companies face pressure to justify high valuations, setting the stage for aggressive cuts if they fail to deliver, my colleague Chiranjivi Chakraborty points out.
Curious case of India’s real estate boom
The high tide of the booming demand for real estate is not lifting all boats. Some allied sectors such as sanitary ware or wood panels have been grappling with weak demand, notes my colleague Alex Gabriel Simon. This has been puzzling analysts, some of whom attribute the conundrum to a gestation period for apartment bookings to translate into demand for these proxies, while others note the higher reliance of these companies on the rural areas amid competition from Chinese imports. Management commentary will be closed watched as we approach the earnings season.
Jefferies predicts rupee outperformance and rising foreign flows
The rupee has been among the least volatile currencies of major economies over the last two years, and a robust outlook for capital flows suggests this outperformance may continue. While slowing IT exports and rising imports of electronics and gold could hit the country’s current account deficit, Jefferies analysts believe it is unlikely to affect the rupee. They also expect the RBI’s forex reserves could reach $700 billion by March 2025. With hopes for Fed easing, foreign flows to debt and stocks are expected to increase.
Analysts actions:
- ACC Raised to Buy at Motilal Oswal Securities; PT 2,830 rupees
- Astral Cut to Hold at Prabhudas Lilladher; PT 2,330 rupees
- Jindal Stainless Cut to Reduce at Prabhudas Lilladher
- UltraTech Cement Cut to Accumulate at Prabhudas Lilladher
- Shree Cement Cut to Accumulate at Prabhudas Lilladher
- Titan Co Cut to Neutral at JPMorgan; PT 3,450 rupees
Three great reads from Bloomberg today:
- Chinese, Indian Stocks Favored Over Japan in Asia’s Second Half
- Hedge Funds That Piled Into Big Tesla Short Stung by Huge Rally
- High-Priced S&P 500 Powers Ahead Untroubled by Political Stress
And, finally..
Domestic funds have supported the stock market with $28 billion of purchases this year, compared with $1 billion from global peers. However, these inflows are beginning to ebb. Last week, local institutional investors became net sellers, pulling out $50 million, their first weekly pullback since April. Some investors likely took profits after the Nifty’s 11% rebound from the post-election selloff, while others held off adding more ahead of the earnings season and federal budget.
–With assistance from Chiranjivi Chakraborty and Alex Gabriel Simon.
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