(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:
- Quality premium debate
- IT emerges as contra bet
- F&O rule shake-up
Good morning, this is Chiranjivi Chakraborty, an equities reporter in Mumbai. Indian markets are set for a lukewarm opening, as Nifty futures trade flat and most Asian peers decline. The silver lining is that the disappointing earnings season is drawing to a close, with beauty retailer Nykaa and Natco Pharma set to report results today. Technology stocks will be key in supporting the market, which remains weighed down by foreign selling.
Asian Paints slump sparks quality premium doubts
Asian Paints is the latest company to be punished by investors for missing earnings estimates, with its shares tanking nearly 10% to more than a three-year low. The stinging reaction sparked a debate on social media on how much of a premium investors should really be paying for some so-called quality stocks. After all, the nation’s top paint maker has trailed the Nifty over the last eight years. While the company is expected to retain its leadership position despite growing competition, any signs of margin pressure could cause a further drop in its earnings multiples.
Tech stock defy FPI selling gloom
When global funds turn bearish on India, it’s usually banks and tech stocks that take the biggest hit as they’re the most widely held sectors. This time, though, IT stocks are breaking the trend, with the sector outperforming the Nifty over the past week. The emerging view is that likely immigration curbs may no longer hurt tech companies as much as they once did. At the same time, likely tax cuts could leave US companies with a bigger pool of money for discretionary spending, some of which might flow to Indian IT firms.
Win some, lose some: BSE, NSE navigate F&O rule changes
BSE shares are still close to their record high from October, partly because some investors expect the stricter F&O rules kicking in next week to impact its larger rival, NSE, even more. That view may only be partly true. ICICI Securities says that while the NSE’s notional turnover may see a bigger drop than BSE’s due to more weekly expiries closing, BSE’s premium turnover could actually decline more. This is because NSE has higher trading volumes on non-expiry days than BSE, and these non-expiry days account for a larger share of premium turnover.
Analysts actions:
- Tata Motors Cut to Hold at Batlivala & Karani; PT 902 rupees
- Exide Industries Raised to Add at Avendus Spark; PT 470 rupees
- Relaxo Footwears Cut to Reduce at Centrum Broking; PT 752 rupees
Three great reads from Bloomberg today:
- Traders Mete Out Stiffer Penalty to India Firms Missing Earnings
- Hong Kong Finance Jobs Jump to Record on Wealth Management Push
- Big Take: Climate Fight Falls Down on Its Goals, Then Came Trump
And, finally..
Domestic investors doubled down on equities in October, even as the Nifty tumbled 6% — its biggest monthly plunge since the Covid crash in 2020 — while foreigners pulled out nearly $11 billion from Indian shares. Flows via mutual funds’ recurring investment plans hit a record $3 billion, and overall flows into stock funds reached an all-time high of $5 billion in October. Not long ago, a surge in small investor activity was often seen as a sign of a market peak. Today, it’s these very mom-and-pop investors who’ve helped keep India’s $4.5 trillion equity market from a bigger downturn.
--With assistance from Ashutosh Joshi, Kartik Goyal and Alex Gabriel Simon.
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