(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:
- Gold loan firms hit
- Cement capacity concerns
- Rupee’s outlook dims
Good morning, this is Chiranjivi Chakraborty, an equities reporter in Mumbai. Indian stocks look set for a subdued start this morning, as traders return from Wednesday’s holiday amid escalating Middle East tensions. With foreign funds extending their selling streak for a third day on Tuesday, possibly driven by the monster rally in Chinese equities, there’s not much in the way of bullish catalysts to lift the mood.
Gold loan firms face slowdown as RBI tightens watch
Soaring gold prices aren’t helping shadow bankers that offer loans against the precious metal. Shares of Manappuram Finance and Muthoot Finance took a hit on Tuesday after a central bank report highlighted procedural lapses in the industry. The bearish mood might persist, especially with the RBI closely monitoring shadow bankers showing “significant growth” in their gold loan portfolios. According to Citi, gold lenders are likely to become more conservative and cautious in complying with prudential norms going forward.
Rupee faces further decline
The rupee was Asia’s worst-performing currency last quarter and a widening current account deficit could worsen things. Gold imports have surged after a customs duty cut, a trend that may continue. Meanwhile, foreign inflows into India are expected to slow, with China suddenly becoming an attractive investment destination. Mizuho Bank predicts the rupee may fall to 84.10 per dollar by end-December, a 0.3% drop from Tuesday’s close.
Strong cement demand meets excess capacity
The end of monsoon may not bring immediate relief for cement makers. The good news is that demand is expected to pick up, with InCred Equities forecasting a 15%-20% jump from current levels. However, the downside is the excess capacity in the system. Prices may remain volatile irrespective of demand, InCred says, and are likely to stabilize only when the industrywide capacity utilization rate tops 80%.
Analysts actions:
- Infosys Cut to Sell at Investec; PT 1,720 rupees
- Ttan Co Rated New Hold at Investec; PT 4,100 rupees
- Dabur India Cut to Hold at Systematix Shares & Stocks
Three great reads from Bloomberg today:
- Ishiba’s Surprise Warning to BOJ Raises Doubt Over Hike in 2024
- China’s Sudden Stock Rally Sucks Money From Rest of Asia
- Big Take: US Tech Is Guiding Russian Missiles Killing Ukrainians
And, finally...
With borrowing costs in the local-currency bond market hitting their lowest in more than three years, many companies are rushing to tap the debt market. The yield on 10-year top-rated notes fell by 24 basis points last quarter — the biggest drop since mid-2021 — on growing bets that the central bank will cut rates soon. According to JM Financial, the 10-year note rate may fall further to 7% by the end of March, down from 7.24% on Tuesday.
--With assistance from Alex Gabriel Simon, Ashutosh Joshi, Mary Nicola and Kartik Goyal.
©2024 Bloomberg L.P.
