(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:
- Tech rally faces reality check
- Tiny IPO baffles investors
- E-scooter space heats up
Good morning, this is Chiranjivi Chakraborty, an equities reporter in Mumbai. Grey clouds over the city may be a fitting backdrop for Indian stocks, which are set for a down day. Asian shares are in the red, with the focus on AI stocks ahead of Nvidia Corp.’s earnings. The selling may spill over to local tech companies, whose recent gains are not entirely justified by their earnings performance.
Tech stocks rally, but earnings are falling behind
The surge in India’s information technology stocks has everything going for them barring one key factor — earnings upgrades. Despite a 17% rally in the Nifty IT index this year, analysts have actually cut their one-year forward earnings estimates. The gains have been driven by valuation expansion, with investors banking on a revenue-growth recovery. According to Jefferies, there’s a limited scope for positive earnings surprises beyond what’s already factored in. This raises a crucial question: is a correction imminent?
Tiny dealership IPO sparks frenzy, defies market concern
The frenzy in India’s micro-listing segment has reached fever pitch, with a tiny IPO attracting oversubscription of 400 times on Monday. While not a record for the so-called SME segment — another offer this year was oversubscribed about 1,000 times — what baffled market watchers is that the firm, New Delhi-based Resourceful Automobile, operates just two Yamaha motorcycle dealerships and has only eight employees. The bumper response stands in contrast to the growing regulator’s concerns about the risks in this volatile niche segment.
Ola IPO sparks new push from Bajaj, TVS in e-scooter space
Ola Electric’s blockbuster IPO has spurred players like Bajaj Auto and TVS Motor to boost their presence in the electric-scooter market, with plans to roll out new models. Although Ola’s market share has fallen slightly since the end of the June quarter, Bajaj and TVS have seen gains, according to Jefferies. As these companies firm up their plans, their shares have risen by over 8% this month to new record highs.
Analysts actions:
- Equitas Small Finance Raised to Buy at Nirmal Bang; PT 99 rupees
- Keystone Realtors Rated New Buy at JM Financial; PT 895 rupees
- KPIT Technologies Cut to Hold at HSBC; PT 2,000 rupees
Three great reads from Bloomberg today:
- LG Electronics Weighs India IPO to Help Chase $75 Billion Goal
- Fed’s Daly Agrees With Powell View That It’s Time to Cut Rates
- A $557 Billion Drop in Office Values Eclipses Revival of Cities
And, finally..
A bull run in oil and gas companies may still have legs, underpinned by surging domestic demand and expectations of higher dividend payouts. The Nifty Energy Index has risen 31% this year, on course for a nine-year winning streak. In the period, a Bloomberg gauge of the world’s 124 mid- to large-sized energy firms has gained 4.7%, with half of its top 10 performers being traditional energy firms from India.
--With assistance from Menaka Doshi.
©2024 Bloomberg L.P.
