(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:
- Funds turn selective
- Index bond outflows
- City gas stocks
Good morning, this is Alex Gabriel Simon, an equities reporter in Mumbai. A big chunk of recent gains got wiped out on Thursday, which makes this a sell-on-rise market. Nifty futures are slightly higher, but the weakness in Asian and US markets signals more losses in domestic equities. With foreign funds pulling out of bonds as well, the rupee could be under pressure in the near term. That may help IT companies on the margin, but spells bad news for the economy as a whole.
Global funds find bright spots in India
Overseas investors may have soured on Indian equities but they have taken a shine to stocks in some sectors. Industrials, healthcare and telecommunication shares have drawn net inflows of about $3 billion each so far this year through Nov. 15, according to data from the National Securities Depository Ltd. In comparison, shares of banks, consumer and energy companies have fallen out of favor as earnings growth has slowed significantly. Nothing is exactly cheap in this market, but foreign investors seem to be betting that segments with higher earnings growth may be able to justify their expensive valuations.
Foreigners dump bonds too
It’s not just stocks — global funds are pulling out of Indian debt as well. The index-eligible bonds are set to see their first monthly outflow since getting added to JPMorgan Chase & Co.’s index. Overseas investors reduced their holdings of so-called Fully Accessible Route, or FAR bonds, by 77.3 billion rupees ($910 million) up to Nov. 28, according to Clearing Corp. of India Ltd. data. Foreigners’ appetite for local debt waned after Donald Trump’s election win stoked speculation of higher US inflation and pushed up the dollar, given the President-elect’s plans to impose tariffs around the globe.
Contrarian view on city gas stocks
Shares of city-gas distribution companies have taken a knock following two straight cuts in government allocation, with the threat of more to follow. However, ICICI Securities remains optimistic. Volume growth looks promising driven by improving transmission and distribution infrastructure, the launch of new car variants, and the increasing shift of commercial vehicles to gas. Also, these stocks are trading at t multi-year low valuations, presenting an attractive risk-reward opportunity for bargain hunters. The brokerage ranks Mahanagar Gas, Gujarat Gas, and Indraprastha Gas as its top picks, in that order.
Analysts actions:
- Colgate India Raised to Add at YES Research; PT 3,375 rupees
- Allied Blenders & Distillers Rated New Buy at ICICI Securities
- Aster DM Healthcare Reinstated Accumulate at Elara
Three great reads from Bloomberg today:
- India’s Falling Wages Squeeze Urban Middle Class and Economy
- Global Funds Find Bright Spots in India Despite Equity Outflows
- Big Take: The First All-EV Market Makes Electric an Easy Choice
And, finally..
Barring a dramatic turnaround, the Nifty is set for back-to-back monthly losses for the first time since early 2023. That streak could snap in December if seasonality plays out in favor of the bulls. Over the past two decades, the benchmark index has delivered average gains of 1.5% in the final month of the year. Add a likelihood of some year-end rebalancing inflows, the stage may be set for a Santa Claus rally to lift both the market and investor spirits.
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--With assistance from Chiranjivi Chakraborty, Bhaskar Dutta and Kartik Goyal.
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