India’s Mutual Funds Go Big on New-Age IPOs

(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:

Good morning, this is Alex Gabriel Simon, an equities reporter in Mumbai. Nifty futures signal another up day for Indian stocks, which scaled a new record on Tuesday. Asian stocks trade mixed as traders debate the size of a potential Fed rate cut later today, a crucial driver of flows to emerging markets including India.

Modi stocks lag as investors turn cautious

Investors are shifting away from stocks expected to benefit from Prime Minister Narendra Modi’s re-election, favoring defensive sectors instead. An index of the so-called Modi stocks — a term by CLSA — has risen only 2% as the leader completed his first 100 days in office after winning a third term in June. Recent policy reversals highlight the pressure he faces after his party failed to secure an absolute majority, raising concerns that stocks tied to government policies may continue to lag the broader market. 

Mutual funds seize large IPOs 

India’s sizzling IPO market is luring major asset managers, with mutual funds jumping onto large offerings from new-age companies. Last month, the largest names added Brainbees Solutions, Ola Electric and Unicommerce eSolutions, according to AMFI data. That’s great news for investors, as all of these share sales have delivered bumper listing gains.

Highway juggernaut hits speed bump

Highway construction has been a cornerstone of India’s state-funded capital spending, benefiting road developers. However, road contract awards fell sharply last fiscal due to rising costs and election-related restrictions. ICRA analysts now expect the government to award 8,500-9,000 kilometers of roads this fiscal, a 20% reduction from its earlier estimate. This may likely hurt construction firms like HG Infra and Ashoka Buildcon, which have rallied over 75% this year. 

Analysts actions:

Three great reads from Bloomberg today:

And, finally.. 

Sovereign bonds rallied further on Tuesday, with the 10-year yield hitting a two-and-a-half-year low. The optimism is being fueled by global debt inclusion, bets of US Fed rate cuts, and falling oil prices. Attractive bond valuations and foreign inflows are also brightening the outlook for sovereign debt, says Suyash Choudhary, head of fixed income at Bandhan Asset Management.

--With assistance from Chiranjivi Chakraborty and Ashutosh Joshi.

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