(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:
Good morning, this is Ashutosh Joshi, an equities reporter in Mumbai. Indian equities could pause for a breather after gaining for six sessions in a row. Market is likely to consolidate recent gains as concerns over earnings, economy and US trade deal linger. Infosys will be in the spotlight ahead of a share buyback plan, while Urban Co.’s IPO heads into its second day — and bids are expected to pick up pace.
Retail fixation for small-caps persists
Small-cap gauges are trailing their mid- and large-cap peers by a mile this year, but retail investors aren’t giving up the chase. Dedicated small-cap funds pulled in 50 billion rupees ($568 million) in August alone, keeping pace with an annual average that’s already 50% higher than 2024’s. The reason for the disconnect is that wealthy investors are less upbeat about the near-term prospects of smaller firms, preferring to park money in safer, large-cap names. For now, retail enthusiasm is the main thing keeping this corner alive.
Appetite for IPOs shows no signs of weakening
If small-cap stocks are testing patience, IPOs are delivering instant gratification. The enthusiastic response to consumer tech firm Urban Co.’s IPO has echoes of the 2021 rush, when a wave of consumer-tech names such as Eternal, Paytm, and Nykaa lit up the market. With no US trade deal in sight yet, investors are finding comfort in consumer-driven stories that are getting a fresh tailwind from recent tax breaks.
Banks earnings to be under pressure in 2Q as well
The banking sector is bracing for another tough quarter. Analysts at Motilal Oswal flag weaker margins, softer loan growth, and lingering stress in unsecured and vehicle loans. Lending yields have shrunk 50 basis points following the 100 basis point cut in repo rates this year, and rising credit costs don’t help. Recovery may come in the December quarter, when policy support and demand pick-up could spark a rebound. Until then, the big three — ICICI Bank, HDFC Bank and State Bank of India — remain the safe bets.
Analysts actions:
Three great reads from Bloomberg today:
And, finally…
It’s not just banks that are hurting. Fears of weak earnings are casting a shadow on the upbeat headlines about tax cuts and nascent signs of a thaw in ties with China. Bloomberg Intelligence now sees Indian firms in the MSCI gauge growing profits at just 5% in 2025 — well below the 8% pace last year and a far cry from the 14% that was on the cards just a few months ago. For investors, the theme across all segments of the market is the same: pockets of strength are there, but earnings have been slow to catch up.
–With assistance from Alex Gabriel Simon, Chiranjivi Chakraborty and Kartik Goyal.
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