(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:
- HDFC Bank earnings
- Policy flip flops on city gas
- Rate-cut hopes dashed
Good morning, this is Chiranjivi Chakraborty, an equities reporter in Mumbai. Unlike the city, the Nifty doesn’t have a clear sky above to start the week, with futures signaling only a modest gain. Investors will focus on recent earnings reports, including HDFC Bank’s, and assess the impact of China’s rate cuts on foreign investments in local shares. Meanwhile, expectations for a rate cut back home are fading fast.
Bank earnings fail to inspire
HDFC Bank’s second-quarter earnings were a bit of a mixed bag. While India’s largest private sector lender beat estimates for net income and operating profit, it also reported an uptick in gross bad loans and a core net interest margin that fell short of estimates. With foreign funds having sold nearly $3 billion in financial services stocks in just the first half of this month, the earnings reports from HDFC Bank and Kotak Mahindra Bank are unlikely to prompt a change of heart.
Policy U-turns rattles city gas investors
Shares of Mahanagar Gas and Indraprastha Gas tumbled on Friday after the government cut their allocation of domestically produced natural gas, erasing most of the gains from the past few months. Investors are now more concerned about recurring policy surprises than fundamentals. In March, Oil Minister Hardeep Singh Puri flagged concerns over the city-gas distributors’ high profit margins. Twice bitten, investors have good reason to shy away from these stocks.
Bears cheers as Das dims rate-cut hopes
Bond bears are likely feeling pretty chuffed after RBI Governor Shaktikanta Das’s comments at the Bloomberg India Credit forum on Friday, where he said that cutting interest rates at this stage would be “very, very risky.” His remarks sent bonds falling by the most in two weeks. This is a dampener for equity markets too, especially with the economy and corporate earnings slowing and consumers showing signs of fatigue. Combine that with the relentless foreign selling and the still-high valuations, and it seems equity bears too could be gearing up for action.
Analysts actions:
- PNC Infratech Cut to Hold at JM Financial; PT 410 rupees
- ICICI Lombard Cut to Hold at CLSA; PT 1,950 rupees
- Tech Mahindra Cut to Add at Avendus Spark; PT 1,800 rupees
Three great reads from Bloomberg today:
- Chinese Banks Slash Lending Rates to Bolster Ailing Economy
- Hyundai’s India IPO Harks Back to Another Era: Andy Mukherjee
- Big Take: Hedge Funds Bet Against EVs and Pile Into Fossil Fuels
And, finally..
Things are looking bleak for equity bulls on the technical front as well. The Nifty is forming a so-called ‘head-and-shoulder’ pattern, which typically signals a likely trend reversal. After three straight weeks of losses, there’s concern that if the trendline breaks below the pattern’s ‘neckline’, it may signal further downside ahead. Right now, everyone’s focused on the 100-day moving average, which has acted as a support level for the Nifty in the past.
--With assistance from Ashutosh Joshi, Alex Gabriel Simon and Kartik Goyal.
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