Indian Mid-Cap Stocks Hit All-Time Highs on Rate Cut Hopes

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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. The mood is upbeat in Asia, with a tech rally sending the regional stock benchmark up more than 1% in early trading. That’s after robust earnings and a surprisingly strong revenue forecast from Nvidia eased concerns about a bubble in the AI industry. Regional moves should give more confidence to Nifty bulls, who on Wednesday pushed the index back above the 26,000 mark, and closer to its record high, amid growing optimism for a US–India trade deal. More broadly, focus Thursday will be on the delayed US September jobs report after minutes of the Fed’s October meeting showed that many officials leaned against a rate cut next month.

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Midcaps surge on easing hopes

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India’s mid-cap stocks are at all-time highs, with analysts expecting more gains as prospects for interest-rate cuts grow. With inflation hitting record lows, traders are betting on back-to-back 25-basis-point cuts — one in December and another in February. The Nifty Midcap 100 Index has risen about 8% in two months, powered by policy support and strong local inflows. Midcap funds took in 38 billion rupees ($429 million) — clear evidence that investors are chasing the rally. That said, the space isn’t cheap: midcaps now trade at 29 times forward earnings versus 21 for the Nifty 50 gauge.

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Wedding season boosts hospitality stocks

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The upbeat mood in the midcap space coincides with the arrival of India’s wedding season — good news for hospitality firms, as it marks a busy period for hotels and event venues. With the weather cooling and a flood of weddings, concerts, and cricketing contests lined up, hotel bookings are soaring. Average room rates were already up around 10% year-on-year in September, according to HVS Anarock. Bengaluru and Hyderabad led the gains, while Goa surprised with a dip. Antique Stock Broking expects hotel operators to be in the spotlight through March as corporate travel gains momentum and event demand stays strong.

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Rising gold prices a double-edged sword for jewelers

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As the old saying goes, excess of anything is bad. Gold’s relentless rally isn’t exactly a straight win for jewelry firms. Soaring bullion prices have hurt demand in the mass-market segment, even as sales in the mid- and premium segments remain resilient. BOB Capital Markets says while the jewelers it tracks delivered a revenue growth of over 20% in the September quarter, the jump in gold prices has forced firms to borrow more to build inventory. And that’s beginning to strain their finances.

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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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Some green shoots are emerging in the beaten-down software sector. After a 15% drop this year, the Nifty IT Index has closed above its 200-day moving average for the first time in nine months and broken out of an inverse head-and-shoulders pattern. While growth challenges persist, optimism around a potential US trade deal and attractive valuations are drawing bargain buyers. 

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—With assistance from Savio Shetty and Santosh Nair.

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