India’s Energy Index Struggles at Key Level With Rising Oil Prices

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(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:

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Good morning, this is Ashutosh Joshi, an equities reporter in Mumbai. Indian stocks may be in a for a choppy session this morning, as investors grapple with the Israel-Iran situation, especially after Trump’s call for evacuating Tehran, which contrasts with earlier optimism the conflict would de-escalate. Meanwhile, Asian stocks gained after a risk-on sentiment returned to in Wall Street overnight. Oil prices are holding steady after last week’s surge, as the conflict in the Middle East continues to boil.

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Iran-Israel conflict can hurt valuations 

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The ongoing conflict between Israel and Iran is emerging as a fresh concern for Indian equity valuations, say analysts at Kotak Securities. So far, Indian stocks have held steady — even with crude oil prices climbing — but investors are starting to get uneasy. The impact on the economy will be felt through higher oil prices, and for the stock market, that could mean lower earnings, reduced valuations, or a combination of both, they say.

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Near-term challenge for textile firms

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Indian textile firms didn’t have the best March quarter. Volume growth was weak, and tariff uncertainty continues to weigh on sentiment. The silver lining? Cotton prices have been subdued, which helped improve profit margins. Garment demand has recovered, but home textiles have failed to pick up. According to analysts at Systematix, this trend might continue for a bit. That said, there’s long-term potential — especially if the US raises tariffs on Chinese goods, which could work in India’s favor.

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Generics drugs still offer big opportunity for drugmakers

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Indian generic drugmakers are likely to stay the course despite the regulatory uncertainty in recent years. There’s a solid opportunity on the horizon: between 2024 and 2028, drugs worth around $109 billion are expected to lose patent protection in the US and EU. Analysts at Antique Stock Broking see this opening doors for a wave of generic launches for Indian pharma companies, even those with smaller U.S. operations but a strong product pipeline. Firms like Alembic and Shilpa Medicare are seen as potential winners in this space.

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Analysts actions:

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Three great reads from Bloomberg today:

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And, finally.. 

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The Nifty Energy Index rallied from its March lows, but has stalled at its 200-day moving average. Despite comprising both upstream and downstream companies, the index typically exhibits a negative correlation with crude prices. A silver lining is that crude oil prices haven’t yet breached yearly highs despite the recent global geopolitical tensions, which could help the energy index to overcome key resistance levels.

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—With assistance from Kartik Goyal and Chiranjivi Chakraborty.

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