Retail Investors Take Advantage of a Rare Dip in Indian Stocks

(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:

HUL disappoints again
Retail to the rescue
Path labs back in favor

Good morning, this is Alex Gabriel Simon, an equities reporter in Mumbai. Bulls continue to be on the backfoot following the overnight selloff in the US and much of Asia trading lower this morning. Nifty futures are trading higher after the underlying index closed at its lowest in two months on Wednesday. That is giving hope that a relief rally could be on the cards.

HUL fails to break earnings miss streak

Consumer bellwether Hindustan Unilever missed net income estimates for the fourth straight quarter in July-Sept. This underscores the weak consumer sentiment in the country, as well as the competition traditional staples companies are facing from new-age brands. Rural volumes are showing signs of a recovery, but it’s the urban demand that is now weighing on the sector. The NSE Nifty FMCG Index is down over 8% so far this month, and ranks among the worst performing sectoral indices in 2024.

Small investors step up as foreigners exit

Retail investors have joined domestic institutions to take advantage of a rare dip in Indian stocks this month. With local equities set to snap a 11-month winning streak, largely due to withdrawals of more than $9 billion by global funds, retail investors stepped in once again. In just the first 18 days of the month, they’ve bought more than $2 billion of shares. For India bulls, that’s a clear sign that domestic liquidity remains robust enough to support the market, even as foreign investors turn away.

Diagnostic stocks surge, but valuations demand growth

Diagnostic stocks may be in the spotlight after Thyrocare Technologies and Dr Lal PathLabs posted better-than-expected quarterly earnings post market Wednesday. Diagnostic companies’ shares have had a solid run in 2024, with names like Dr Lal, Metropolis Healthcare, Vijaya Diagnostics and Thyrocare seeing gains of 25-44%, as concerns about price wars with online rivals have eased compared to last year. Problem is, valuations remain high, trading at 50-60 times one year forward price earnings. To keep investors interested, these companies will need to deliver strong growth moving forward.

Analysts actions:

DMart Cut to Underperform at Macquarie; PT 3,700 rupees
SRF Cut to Sell at Centrum Broking; PT 2,013 rupees
Max Financial Raised to Buy at Nirmal Bang; PT 1,375 rupees

Three great reads from Bloomberg today:

Tesla Delivers Blowout Quarter, Lays Out Bold Ambitions for 2025
Xi-Modi Breakthrough Followed Months of Pressure by India CEOs
Two Weeks Out, Trump and Harris Are Locked in a Dead Heat

And, finally..

Domestic institutions have come out swinging to support the stock market at every dip this year, so it’s no surprise they’re back at it, snapping up $10 billion worth of shares this month. What’s different this time? Net purchases by local mutual funds, insurers and banks combined have surpassed $50 billion for the year, set for an annual record. Looks like they’ve heeded UBS Global Wealth Management’s advice — that the recent selloff is a buying opportunity.

--With assistance from Chiranjivi Chakraborty, Ashutosh Joshi and Kartik Goyal.