(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:
- Adani Wilmar deal
- Microfinance in RBI crosshairs
- Auto recovery
Good morning, this is Alex Gabriel Simon, an equities reporter in Mumbai. India’s stock market is set to cap its ninth straight year of gains despite losing momentum since late September. Traditionally, the absence of foreign investors in the last fortnight of December was a time for domestic traders to run amok. But this time, a mix of tepid earnings, slowing economy and weak rupee has prompted even local players to hold off taking fresh bets. For today, Nifty futures point to more losses, reflecting the broadly bearish mood in the region.
Adani’s Wilmar JV Exit a win-win for both
The Adani Group’s decision to exit from its India venture with Wilmar International may prove to be a win-win for both parties. Adani will raise about $2 billion from the exit, which it plans to use to scale up its core businesses such as renewable energy and airports. For Wilmar, the move could shield its India unit from the turbulence that has periodically rocked the Gautam Adani-owned conglomerate since January 2023, amid concerns over governance issues and legal challenges in the US. Adani has denied the allegations. The Adani Wilmar stock remains 61% below its April 2022 peak of 841 rupees.
Microfinance still on RBI’s watchlist
The microfinance segment continues to face challenges, with the Reserve Bank of India once again flagging risks in its financial stability report. Stressed assets in the 31-180 days past due rose to 4.3% in September, up from 2.15% in March. This indicates earnings for companies in the sector are likely to remain under pressure. However, with stocks like CreditAccess Grameen and Fusion Finance having dropped 43% and 70% respectively this year, some contrarian investors are of the view that the worst may have already been priced in.
Auto sector’s woes in rear-view mirror
After hitting a record in September, the Nifty Auto index is back to levels seen in May on concerns that sales may continue to be under pressure in the near future. However, Anand Rathi Securities takes a contrarian view, suggesting these worries may be overdone. In its report, the broker says that recovery in the rural markets should keep two-wheeler sales healthy. Passenger vehicle sales are also expected to remain strong, aided in part by higher discounts. Additionally, the base effect is expected to benefit commercial vehicle sales, while tractor sales are projected to grow at a mid-single-digit pace.
Three great reads from Bloomberg today:
- Rupee volatility surge puts RBI’s currency strategy in focus
- Prabowo warns Indonesia could sink ships smuggling textiles
- Treasury’s $50 trillion deluge will test strained dealer ‘pipes’
And, finally..
The rupee’s one-month implied volatility has shot up to its highest level since August 2023, stoking speculation among currency traders that the RBI may be easing its grip on the currency in the face of a resurgent dollar. For context, the currency took more than 13 months — from September 2023 through October 2024 — to weaken from 83 to 84 per dollar. In contrast, it took just two months to fall past the 85 mark.
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--With assistance from Chiranjivi Chakraborty and Bhaskar Dutta.
©2024 Bloomberg L.P.