(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:
- Midcap resilence
- Pharma haven
- Infrastructure play
Good morning, this is Ashutosh Joshi, an equities reporter in Mumbai. No respite for bulls as Nifty futures point to more weakness amid bearishness in Asian markets this morning. As the rupee continues to be under pressure, traders are preferring pharma to IT even though both sectors stand to benefit from a weak currency.
Earnings hopes fuels midcaps resilence
The September-quarter earnings season was a howler, but that hasn’t dissuaded traders from betting on a turnaround this time. Mid-cap shares have held ground in the recent selloff, and Jefferies believes investors may be willing to pay a premium for them over the Nifty 50 stocks. That’s because the NSE Midcap 100’s earnings are estimated to expand at 20% CAGR over fiscal years 2024-2026, versus just 12% growth for the Nifty. However, bears argue that in a slowing economy, smaller companies tend to get hit harder than their larger peers.
Traders seek shelter in pharma as rupee wilts
Pharma shares soared on Thursday, even as the shock waves from the US Fed’s hawkish outlook rippled through the broader market. The rupee’s record low is a boon for traders bullish on pharma companies, which earn a good chunk of their revenue from exports. However, it’s not just the currency factor at play — generic drugs prices in the US, a key market, have been stable. Together, these factors create a potent mix to keep the sector’s 34% year-to-date rally going.
Infra stocks may shine as contract awarding picks up
Infrastructure contract awards have slowed this year compared to last year, a trend this is not uncommon during general election years. A similar slowdown was seen in 2019 following the April polls that year, according to Antique. The broker notes that the overall robustness in new project announcements and a recent uptick in tendering activities indicate contract awarding is likely to pick up shortly. NCC, HG Infra Engineering, BHEL, Siemens, IRB Infrastructure Developers, and Hitach Energy are among Antique’s top picks.
Analysts actions:
- Home First Finance Raised to Buy at Axis Capital Limited
- IndiaMart Raised to Reduce at Kotak Securities; PT 2,350 rupees
- Swiggy’s Profitability Poised to Expand on Better Execution: JPM
Three great reads from Bloomberg today:
- Disruptive 10-minute deliveries spread to India’s food business
- China Stock’s 370% surge is aided by fever for collectible dolls
- Big take: What Snapchat owes families for teen Fentanyl crisis
And, finally..
Home sales are strong, foreign investors have poured record sums into India’s real estate market, and most property developers are reporting robust earnings. Despite this, the NSE Nifty Realty index has hit a wall on the technical charts for the third time this year as it struggles to break past the 1150 level. The likelihood of a rate cut has increased following the slowdown in the September-quarter GDP growth. In theory, lower interest rates bode well for the real estate sector, but savvy traders appear to be cashing their gains while the party is still on.
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--With assistance from Savio Shetty.
©2024 Bloomberg L.P.