(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:
- M&A in paints sector
- More juice in pharma
- Limited downside in Nifty
Good morning, this is Chiranjivi Chakraborty, an equities reporter in Mumbai. The selloff on Wall Street will keep risk sentiment in check even as Nifty futures indicate a positive start. India‘s slowing economic growth and muted earnings updates from the financial sector has further clouded the outlook for equities in 2025. That said, bulls are still hopeful of the earnings season not throwing up too many nasty surprises.
M&A buzz may brighten the outlook for paint makers
Paint makers had a challenging 2024, hit by a double whammy of slowing demand and intense competition. However, the sector could be in focus this year due to a likely pick up in M&A activity. According to local media, Akzo Nobel India’s parent is looking to sell its stake, with rivals Berger Paints, JSW Paints and Indigo Paints in the race. The Amsterdam-based group’s Indian unit has already announced plans to recast its operations. If market pressure persists, some smaller players in the sector may choose to exit the business.
Pharma sector set to build on 2024 momentum
The Nifty Pharma index’s blowout 39% rally last year might still have legs as third-quarter results season gets underway. Motilal Oswal Securities expects the earnings growth momentum to sustain, with profits rising over 19% on average. Falling raw material prices and an increase in launches in the US are the drivers of this bullish outlook. However, it remains to be seen how much of a premium are investors willing to pay for growth. At about 30 times one-year forward earnings, drugmakers are trading one standard deviation above their five-year average.
Bulls hold ground in derivatives market
The NSE Nifty 50 index has had a volatile start to the year. After a powerful rally last Thursday, the index quickly erased gains over the next two sessions and is now trading flat year-to-date. From a derivatives perspective though, bulls may have the upper hand for the time being. Bloomberg-compiled data shows there was no creation of short positions during Friday and Monday’s decline. Maximum open interest in put options for the January monthly expiry is clustered at the in-the-money 24,000 strike. On the technical front, the 23,250-23,450 band is expected to provide strong support. While big upmoves look unlikely before the Budget, the downside appears to be limited.
Analysts actions:
- Macrotech Cut to Hold at ICICI Securities; PT 1,323 rupees
- ICICI Prudential Rated New Buy at Centrum Broking; PT 780 rupees
- Zomato Cut to Hold at Jefferies; PT 275 rupees
Three great reads from Bloomberg today:
- New RBI Chief Faces Calls to Unshackle Rupee Amid Surging Dollar
- Quantum Computing Stocks Drop as Nvidia CEO Sees Use Years Away
- Big Take: Chinese Markets Sound Alarm Over Deflationary Spiral
And, finally..
Indian stocks may struggle in the run up to the federal budget on Feb. 1, going by past trends. Since 2003, the MSCI India Index has dropped an average of 1% in the month before the budget, according to Bloomberg Intelligence. While the prospects of positive and negative returns are evenly split, the size of the returns is skewed toward losses. There have been nine instances of declines exceeding 3%, versus just two occurrences of gains of over 3%. This year, market participants will be watching the government’s allocation for capital spending to revive a sluggish economy.
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--With assistance from Kartik Goyal and Ashutosh Joshi.
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