(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:
- Large stocks shine
- Betting on Swiggy
- Stable rupee fallout
Good morning, this is Alex Gabriel Simon, an equities reporter in Mumbai. Nifty futures are trading flat, mirroring the narrow range seen in key Asian markets. While the worst of the recent selloff locally appears to have subsided, bulls are likely to tread cautiously due to still-elevated valuations and sluggish foreign inflows. Adani stocks rebounded on Wednesday, but options writers are asking a higher premium for selling hedges in those stocks.
Focused bets on top stocks reward investors
Investors focusing on India’s top 10 stocks by market value have reaped rewards from taking concentrated bets during the recent weakness. An index tracking these stocks has beaten the broader market since the start of October. This suggests that any market rebound could be more concentrated, as investors usually seek out the safety of large caps during uncertain times. The rebound in HDFC Bank and Reliance Industries — two of the Nifty’s largest members — shows that in this market, perhaps less is more.
Swiggy shares get a boost from Zomato’s inclusion
Zomato’s shares’ impending inclusion in the BSE Sensex next month is driving some investors to load up on its peer, Swiggy. They are betting that Swiggy, flush with cash from its recent IPO, can potentially close the gap if not overtake the market leader. Zomato’s shares have more than doubled this year, leading a section of the market to believe that Swiggy may be relatively undervalued. Although Swiggy is yet to turn a profit, seasoned investors know that big gains are often made by backing underdog companies.
Stable rupee has a liquidity fall out
India’s rupee has managed to weather the global currency storm unleashed by Donald Trump’s tariff threats, but not without consequences. Large-scale dollar sales by the RBI to quell swings in the exchange rate have drained banks of funds, pushing overnight rates to a five-month high. Earlier this week, banks borrowed money from the central bank for the first time in two months. If the RBI continues to shield the rupee during Trump’s second term, banks may face ongoing liquidity pressures next year, causing borrowing costs to stay high.
Analysts actions:
- Colgate India Raised to Overweight at JPMorgan; PT 3,400 rupees
- Power Grid Raised to Buy at ICICIdirect.com; PT 395 rupees
- Amber Enterprises Cut to Neutral at Goldman; PT 6,300 rupees
Three great reads from Bloomberg today:
- India’s 500% Boom in Unlisted Share Trades Shows Rush for Riches
- US Readies China Chip Curbs That Stop Short of Earlier Proposals
- Big Take: Filling a Trump-Shaped Hole in Ukraine’s Defenses
And, finally..
Adani Group stocks rebounded on Wednesday, but the overhang from the US charges persists. Take flagship Adani Enterprises. The stock rallied 12%, with the 2,400 and 2,300 November call expirations being the most traded. At the same time, the cost of hedging against declines in the flagship is near its peak for the month. This shows that traders want to play it safe by bolstering downside protection.
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--With assistance from Chiranjivi Chakraborty, Bhaskar Dutta, Savio Shetty and Kartik Goyal.
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