Indian F&O’s Explosive Growth Slows After Regulatory Steps

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(Bloomberg) — Before the trading day begins, we give you a summary of the key news and events likely to move the markets. Today we look at:

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• Gambling companies
• Hospital stocks shine
• Capital revival bets

Good morning, I’m Chiranjeevi Chakraborty, equity correspondent in Mumbai. Traders are likely to see green on the screen this morning, with Asian markets higher after a rebound on Wall Street. With US inflation data on Wednesday unlikely to change expectations for a rate cut next week, local stocks may be hit by higher foreign inflows and a weaker dollar. This optimism may not extend to stock markets, which are witnessing a decline in trading volumes due to new restrictions on trading financial derivatives.

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Online gaming companies are getting a break

Chief Economic Advisor Venkitraman Anantha Nageswaran may not be a fan of equity derivatives trading, but his remarks on Wednesday that India should not stifle innovation in industries such as online gaming and cryptocurrencies will go down well with investors. Delta Corp shares jumped after his comments, while Nazara Tech shares partially rebounded, closing above the intraday low. This will come as much-needed relief to the sector which has faced increased scrutiny due to government concerns about the potential negative social impact of speculation.

Hospital stocks shine on the global stage

Healthcare stocks have emerged as one of the best-performing thematic investments in India in 2024, with the BSE Healthcare Index rising more than 40% this year. Hospital operators like Fortis, Max and Apollo are top performers according to Bloomberg’s measure of healthcare providers. The recent $5 billion merger deal involving a Blackstone-backed company reflects the growing interest of major investors in India’s healthcare sector. Private hospitals in India benefit from strong demand for premium services, while also providing high-quality, globally competitive care. Analysts say higher average revenue per bed and newly built capacity will boost earnings going forward.

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All eyes are on reviving government capital expenditures

While a rate cut remains the market’s ultimate desire, traders have begun to estimate a sharp rebound in government capital spending in the second half of the fiscal year ending in March. Defense and infrastructure-related stocks will be the natural beneficiaries, according to Emkay Research analysts. They recommend Larsen & Toubro, HG Infra and Hitachi Energy as the best picks for playing capital recovery bets.

Analyst movements:

• Cera Sanitary Cut to be added to ICICI Securities; Rs 8,416
• AU Small Finance has rated LKP shares a New Buy; 730 rupees
• Larsen rates new buyout at Phillip Secs; 4400 rupees

Three great reads from Bloomberg today:

• India startup Rebel Foods raises funds ahead of planned IPO
• Inflation gives the Fed a green light for December, and a yellow light for 2025
• Big Take: Market-moving data under threat with Trump’s return

And finally..

The explosive growth of the Indian equity derivatives market has finally started slowing thanks to recent regulatory steps to curb excessive speculation. With most weekly contracts — one of investors’ most liquid trading instruments — now extinct, F&O’s 10-day average theoretical trading volume has fallen below $3 trillion for the first time since mid-2023, according to data compiled by Bloomberg.

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