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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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- FMCG firms
- Electricity futures
- Paper stocks
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Good morning, this is Ashutosh Joshi, an equities reporter in Mumbai. Indian stocks are likely to extend their winning streak to the third consecutive session, as the mood in global markets remains upbeat. There could be volatility because of the expiry of both monthly and weekly derivatives contracts on the Nifty 50 Index.
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Receding agri inflation to boost FMCG firms’ margins
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Nifty’s sector gauge of consumer goods firms has traded more than 10% below its peak for nine straight months even as it held above its long-term valuation. Resumption of government capex, tax cuts and easing of interest rates is yet to lift consumption. Analysts at Antique Stock Broking expect lower agri inflation to the boost profit margins of top players like Hindustan Unilever and Nestle India by shrinking raw material costs.
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NSE, MCX to gain from increased hedging in power market
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The Indian derivatives market will soon see a new product as the NSE is set to launch monthly electricity futures after receiving SEBI approval. Rival Multi Commodity Exchange too is in line, having got regulatory clearance. The exchanges aim to capitalize on demand for instruments helping power producers, distributors and companies manage swings in electricity prices. In a sector typically characterized by long-term power agreements, hedging is becoming increasingly important as renewable energy grows popular.
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Outlook for paper stocks unlikely to improve soon
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Paper stocks have lagged the broader market as the sector grapples with volatile demand and cost pressures. Analysts at BOB Capital expect the companies to report flat margins for the June quarter. Dealers see an uptick in uncoated paper prices only in September when publishers start printing new textbooks. Market leader JK Paper is down over 10% this year, while packaging firm Huhtamaki India is among the major underperformers with a 20% decline.
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Analysts actions:
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- Voltas Raised to Buy at Avendus Spark; PT 1,516 rupees
- FIEM Ind Cut to Reduce at NMV Securities; PT 1,670 rupees
- JK Lakshmi Rated New Buy at Asit C Mehta; PT 1,013 rupees
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Three great reads from Bloomberg today:
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- State Bank of India Bank Picks Citi, HSBC Among Six for $3 Billion Sale
- Federal Reserve Releases Plan to Relax to Relax Key Bank Capital Rule
- Big Take: China’s $1.3 Trillion Fund Retreats From Wall Street
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And, finally..
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Indian technology stocks appear poised to extend recent gains, supported by favorable seasonality and an improving earnings outlook ahead of June-quarter results next month. On the technical charts, the Nifty IT Index to Nifty 50 price ratio has rebounded from a multi-year support level of 1.4 times, signaling further upside, according to JM Financial. Shares of software exporters are already on track for their strongest monthly performance relative to the Nifty 50 so far this year.
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—With assistance from Chiranjivi Chakraborty and Savio Shetty.
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English (US)