Indian Central Bank’s Jumbo Rate Cut Could Supercharge IPO Pipeline

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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 Chiranjivi Chakraborty, an equities reporter in Mumbai. Nifty futures indicate a positive start, fueled by the buzz from Friday’s blockbuster monetary policy announcement. Asian equities are trading higher on renewed optimism about US-China trade talks, which could further boost market sentiment. In the local bond market, attention will focus on short-term yields, where the rally is expected to continue.

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Jumbo rate cut can supercharge IPO pipeline

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The Reserve Bank of India’s surprise 50-basis point rate cut and cash boost could spur companies to speed up public listing plans, as lower rates reduce the hurdle for equity issuance. Utkarsh Sinha, managing director at Mumbai-based investment bank Bexley Advisors, expects stronger demand from fund managers as cheaper capital fuels appetite for new shares. An immediate test will be HDB Financial Services’ upcoming IPO, following its recent regulatory approval.

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Wall Street turns bullish on Indian derivatives

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Wall Street banks are doubling down on their bullish view on Indian equities, positioning the country as a standout even amid the global trade uncertainty. This optimism is spilling into short-term leveraged products, with JPMorgan recommending short positions on one-month Nifty volatility, while Bank of America suggests using now-cheaper hedges to protect long positions. The RBI’s surprise liquidity boost on Friday is likely to further boost this positive sentiment, adding fuel to India’s market momentum.

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Early rains dampen demand for room air-conditioner makers

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It’s not just cement producers. Room air-conditioner makers have also been caught off guard by the early onset of the monsoon. According to analysts at Centrum and IIFL, demand for room aircons began tapering off as early as April, when the summer failed to be as harsh as predicted by the weather office. Centrum estimates that industry volumes for the current quarter could be 25%-30% lower year-on-year. Producers are now banking on the new energy efficiency norms coming in January to spur some advance buying. Meanwhile, shares of leading players like Voltas, Blue Star, and Epack Durable have declined between 26% and 34% so for this year.

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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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Short-term bonds rallied on Friday after the RBI’s surprise move to slash the cash reserve ratio by the most in five years, a move it estimates will inject 2.5 trillion rupees of liquidity. This could lead to a lasting increase in the gap between short- and long-term interest rates, as easier access to money may push short-term rates lower, said Anurag Mittal, head of fixed income at UTI AMC. 

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—With assistance from Savio Shetty and Kartik Goyal.

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