The Indian stock market is poised for a positive start, with Nifty futures pointing upwards, still riding the wave of excitement from the Reserve Bank of India’s (RBI) blockbuster monetary policy announcement last Friday.
A generally upbeat mood across Asian equities, driven by renewed optimism about US-China trade talks, is also expected to lend further support to market sentiment. In the local bond market, all eyes will be on short-term yields, where the recent rally is anticipated to continue.
The Reserve Bank of India’s unexpected 50-basis point cut in the repo rate, coupled with a significant cash boost to the banking system, could be just the catalyst needed to spur companies to fast-track their plans for public listings.
Lower interest rates typically reduce the hurdle for equity issuance, making IPOs a more attractive proposition for both companies and investors.
An immediate litmus test for this revived IPO sentiment will be the upcoming public offering from HDB Financial Services, which recently received regulatory approval.
Wall Street doubles down on India, derivatives in focus
The optimism isn’t confined to domestic players.
Wall Street banks are increasingly bullish on Indian equities, positioning the country as a standout performer even amidst the uncertainties clouding global trade.
This positive view is now spilling over into the market for short-term leveraged products.
JPMorgan, for instance, is recommending short positions on one-month Nifty volatility, while Bank of America suggests using now-cheaper hedges to protect existing long positions.
The RBI’s surprise liquidity injection on Friday is likely to further amplify this positive sentiment, adding more fuel to India’s already strong market momentum.
Monsoon woes: early rains cool demand for air-conditioner makers
While financial markets are buzzing, some sectors are facing weather-related headwinds.
It’s not just cement producers feeling the impact; room air-conditioner manufacturers have also been caught off guard by the early arrival of the monsoon season.
According to analysts at Centrum and IIFL, demand for room air conditioners began to taper off as early as April, as the summer failed to live up to the harsh heat predicted by the weather office.
Centrum estimates that industry volumes for the current quarter could be significantly lower, potentially down by 25%-30% year-on-year.
Air-conditioner producers are now pinning their hopes on new energy efficiency norms, set to come into effect in January, to spur some advance buying from consumers looking to upgrade before the changes.
In the meantime, shares of leading players in the sector, such as Voltas, Blue Star, and Epack Durable, have seen declines ranging from 26% to 34% so far this year.
Bond market reacts: short-term yields rally on liquidity boost
The short-term bond market experienced a significant rally on Friday following the RBI’s surprise decision to slash the cash reserve ratio (CRR) by the most in five years.
The central bank estimates this move will inject a substantial 2.5 trillion rupees of liquidity into the system.
Analyst actions
Several stocks have seen rating changes from prominent brokerages:
- HDFC Bank: Raised to Buy at ICICI Securities; Price Target (PT) 2,300 rupees.
- Kotak Mahindra Bank: Rated New Add at InCred; PT 2,410 rupees.
- PNC Infratech: Raised to Buy at ICICIdirect.com; PT 360 rupees.
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