Select midcaps earn earnings upgrade amid Covid gloom
Rupee-dollar forwards premium shoots up, raising hedging costs
Sugar stocks on a high on global prise rise in sweetner
Private banks laggards in passing on RBI rate cut
Hi there. Welcome to ETMarkets Morning, the show about money, business and markets. I am Sandeep Singh.
Let’s start with a quick glance on the state of the markets.
The trade setup on the domestic equity bourses looked weak this morning. Nifty futures traded flat on the Singapore Exchange. Stocks in other Asian markets opened mixed. Japanese and Chinese markets are closed for holidays. Wall Street indices ended higher in overnight trade amid a largely upbeat earnings season. Dow rose 0.7%, while the S&P500 gained 0.27%. Nasdaq came under pressure from declines in some high-flying growth stocks, and dropped 0.48%. Ten-year Treasury yields dropped back to around 1.6% amid comments from Federal Reserve Chair Jerome Powell that the economic recovery is patchy. In commodities, oil traded steady after climbing over 1%. The dollar also steadied after declining along with Treasury yields. And in bullion, silver led gains in precious metals as the prospect of near-zero rates for longer boosted demand. Gold climbed 1.3% to $1,791.46 an ounce.
That said, here’s what else is making news.
With the March quarter earnings season throwing up fewer surprises for investors so far compared with the previous two quarters, the action is increasingly turning stock-specific. For analysts, upgrading earnings of companies and raising price targets are getting difficult with the outlook turning hazy amid the second wave of Covid-19 gripping the country. But analysts have felt confident to raise price targets on a few midcap stocks. They included JSW Energy, Indian Bank, KPIT Technologies, Birla Corp, Bajaj Consumer, Philip Carbon, Equitas Holding among others.
Sugar stocks rallied up to 20% on Monday in an otherwise weak market on strong earnings outlook and optimism over the government’s policy on ethanol blending. Bajaj Hindusthan ended at 20% upper circuit and a 52-week high. Dhampur Sugar Mills, Dwarikesh Sugar Industries and Uttam Sugar Mills surged over 19% each while Shree Renuka Sugars ended locked in the 10% upper circuit. Analysts said these stocks gained as sugar prices shot up in international markets and the government gave a mandate to increase ethanol blending in petrol to 20% by 2025.
The cost of covering unhedged currency risks in the derivative markets surged on Monday, potentially affecting companies with large import bills, with the one-month onshore forwards premium on the rupee-dollar pair spiking up to 360 basis points through the trading session. The unusual movement is attributed to several factors: In-bound dollar flows for the PowerGrid InvIT IPO, a legal tussle between the government and Cairn Energy over arbitration payments, and likely regulatory intervention in the currency markets.
Private sector banks failed to match RBI’s reduction in the interest rate in the past year to ease the pain inflicted by Covid-19 while their state-owned peers have been generous in extending the benefits to borrowers by reducing more than the central bank. The average fall in lending rates for banks such as Axis Bank, ICICI Bank, Federal Bank and DCB was about 22 basis points on fresh loans compared with RBI’s115 basis points reduction in the past year.
And lastly, some good news, India’s job market, which was on the path of recovery, was thrown into a state of panic in April as the second Covid-19 wave spiralled across the country and lockdowns re-emerged in various states. Open positions at the end of April dropped 31% from March to touch the lowest level in 2021, according to data from official company job pages on LinkedIn and direct postings on top job boards.
Now before I go, here is a look at some of the stocks buzzing this morning.
SBI Life Insurance’s first year premium, a key business matrix for insurance firms, grew 45% to Rs 3,660 crore from Rs 2,522 crore over the same period.
Even as the cash-strapped SsangYong Motors is struggling to stay afloat, parent firm M&M is looking to support the electric vehicle business at the Korean car maker.
Bandhan Bank shares could be re-rated after landslide wins for the TMC in West Bengal and BJP in Assam as the incumbent parties had not pushed for microfinance loan waivers in the two states
Natco Pharma on Monday announced it has received emergency use approval for baricitinib tablets from the Indian drug regulator Central Drugs Standard Control Organisation
Mid-size IT services provider Persistent Systems will look at niche acquisition opportunities in this fiscal year, its top executive said.
Do also check out over two dozen stock recommendations for today’s trade from top analysts on ETMarkets.com.
That’s it for now. Stay put with us for all the market news through the day. Happy investing!
