(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:
- Smallcaps buck selloff
- Alcohol sales thrive
- Banks trouble bulls
Good morning, this is Ashutosh Joshi, an equities reporter in Mumbai. India’s extended monsoon is showing little signs of retreating as Mumbai received yet another bout of heavy pouring overnight. Same goes for local shares, which barring a few weak sessions have managed to sail in turbulent waters as domestic investors continue to power the market rally and resumption of foreign purchases adds more fervor. Nifty futures are pointing at gains as equities across Asia rebound after a global selloff Wednesday.
India’s minnows sidestep global selloff
India’s smallcaps notched another record high on Wednesday, unfazed by the selloff that roughed up global equities. The resilience underscores investors’ optimism for the domestic economy and signals that bullish momentum may sustain for the rest of 2024. While concerns over rich valuation multiples exist, investors are climbing the wall of worry to buy into in this pocket of India’s $5 trillion market. The small-cap gauge has jumped 31% this year, outpacing gains in MSCI’s gauges for international peers.
Indian summer fails to cool down alcohol sales
Prolonged elections and extreme heat slowed sales growth in most sectors this year, except for alcoholic beverages. Despite bans and supply side issues, most players posted reasonably strong sales numbers, according to Nuvama Wealth. Industry major Radico Khaitan is already seeing early success in its premiumization, and the government’s decision to ease ethanol curbs should keep prices of extra neutral alcohol within a stable range. Nuvama Wealth recommends buying United Breweries and United Spirits.
Banks pose a bigger concern for bulls than tech
Tech stocks took a significant hit on Wednesday, but it’s the banks that are a bigger worry for India’s stock bulls. Lenders hold the most influence in the nation’s stock market, with a 33% weight on the benchmark index. However, Morgan Stanley’s warnings about rising margin pressures suggests that the sector isn’t out of the woods yet. While Nifty’s record rally this year has come without much contribution from banks, other sectors may not have enough fire power left to compensate for their underperformance.
Three great reads from Bloomberg today:
- Anti-India Backlash Sweeps Bangladesh in New Challenge for Modi
- JPMorgan Team Scraps Bullish China Stocks Call on Trade War Risk
- Billionaire NFL Family Eyes Windfall From Wall Street, Swifties
And, finally..
Foreigners have resumed their bullish positioning on Indian equities. They’ve bought over $1 billion of shares on a net basis in the first few days of September, after a bout of selling in the early weeks of August. The faltering rally in tech-led markets is clearly pushing investors to look at India, where such stocks hold less sway. They have also continued to add more of longer contracts in index derivatives.
--With assistance from Alex Gabriel Simon.
©2024 Bloomberg L.P.
