(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:
- India outlook
- Foreign selling
- Tiny IPO warnings
Good morning, this is Ashutosh Joshi, an equities reporter in Mumbai. Traders will head to their desks this morning with some relief as the jaw-dropping gains in China ease. The rotation from India to China has seen foreign funds pull out more than $5 billion over the past week, but matched by record domestic institution buying. Nifty futures point to a positive start on Tuesday.
Bulls Pin Hopes on Earnings to Counter China
Concerns about foreign investors shifting from India to China, along with rising oil prices due to the Middle East crisis, have pushed local equities close to oversold levels. However, India bulls remain optimistic that strong earnings growth and robust liquidity will offset the rotation toward the surging markets in China, which still faces headwinds like a weak property market and sluggish consumer spending.
Foreign selling spree tests local resilience
It’s hard to tell whether it’s the China rotation or concerns about overvaluation, but foreigners are dumping Indian shares by the truckloads. They’ve pulled $3.6 billion from local equities so far this month, with provisional net sales of $987 million recorded on Monday alone. The heavy selling is putting to test the widely-held belief that local liquidity can easily absorb whatever global funds sell. That said, domestic institutions plowed a record net $1.6 billion on Monday.
Tiny IPOs in line of regulatory fire
The hype over tiny IPOs is fading quickly mainly due to the tighter surveillance measures by exchanges after several cases of fraud and price manipulation. Saj Hotels’ shares closed below their offer price, and HVAX Technologies managed only a modest gain on their first trading day on Monday. This lackluster debut signals that the recent frenzy in the micro-listing segment might be cooling off. Regulators have been cautioning about the risks in this volatile niche segment, and it appears that investors are starting to pay heed to those warnings.
Analysts actions:
- Marico Raised to Hold at BOB Capital Markets; PT 653 rupees
- Coforge Raised to Add at Mirae Asset Securities; PT 7,950 rupees
Three great reads from Bloomberg today:
- Chinese Stocks Rally on Return From Holidays as Hong Kong Slides
- Israel Fights on Multiple Fronts as War With Hamas Marks a Year
- Big Take: What Really Happens When US Hits China With Tariffs
And, finally..
Bond traders are hoping for some respite in Wednesday’s RBI policy meeting. They’ve just suffered the worst week since July 2023, as a double whammy of the Middle East war and strong US economic data pushed yields higher. The selloff has a silver lining: it has opened up room for bulls in case the central bank shifts to a neutral stance or hints at cutting rates in the not-so-distant future.
--With assistance from Chiranjivi Chakraborty, Alex Gabriel Simon and Kartik Goyal.
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