Traders Look Forward To An Auspicious Week For Indian Equities

(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:

Good morning, this is Chiranjivi Chakraborty an equities reporter in Mumbai. Traders will look forward to an auspicious start for Indian equities this week when the nation celebrates the Hindu festival of lights. Nifty futures indicate a positive start after four straight weeks of losses. ICICI Bank’s stellar earnings announced over the weekend as well as oversold conditions for the Nifty 50 should attract bargain hunters.

Indian stocks in the oversold zone

After four successive weeks of losses, a technical momentum indicator on the Nifty index has hit oversold territory. The 14-day relative strength index — a measure of short-term momentum — dropped below the critical 30 mark for the first time in a year. The last time this happened, the Nifty staged a ferocious year-end rally. But this time around, a similar rebound looks less likely. A cocktail of persistent foreign investor selling, disappointing earnings, and a slowing economy is making it tough for bulls to make a comeback. 

Charts hint at relief for Nifty Bank

On the ground, the picture for banks isn’t looking pretty. The economy is slowing, and credit growth is losing steam. This year, the Nifty Bank index has trailed most of its sector peers, with only the FMCG index worse. Still, traders who are bullish on banks might find some solace in the technical charts. According to Systematix, Bank Nifty hasn’t dropped more than 13% in the last two years, and recent corrections have ranged between 6% and 9%. With the gauge already down about 7%, a pullback could be on the cards, according to the broking firm. 

Indigo bulls face turbulence with surprise loss

Interglobe Aviation’s shock September quarter loss serves as a rude reminder of the well-worn fact: airlines seldom make money for their shareholders. After a spectacular rally this year, Indigo’s stock has fallen about 13% from its record high in the past month. While the company’s dominance of the Indian skies remains solid and passenger traffic continues to grow, analysts are worried that airlines are adding capacity faster than passenger traffic is increasing. If this trend continues, they caution, airfares could drop in the coming months.

Analysts actions:

Three great reads from Bloomberg today:

And, finally.. 

Often seen as a barometer of animal spirits in India’s stock markets, small-cap stocks have had an impressive run. But the momentum is fading as sentiment sours on mid- and small-cap shares amid a broader market selloff. Last week, BSE’s small-cap index trailed behind its larger peer by the widest margin since December 2022, signaling a cooling in the rally in smaller companies. 

--With assistance from Ashutosh Joshi, Alex Gabriel Simon and Kartik Goyal.

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