Indian Capital Goods Stocks Regain Investor Favor

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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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• Government action
• Capital plays to its advantage
• Adani green sparkles

Good morning, I’m Chiranjeevi Chakraborty, equity correspondent in Mumbai. Traders will likely be looking past Friday’s disappointing GDP growth data, as much of the slowdown has largely been factored into the recent correction. Although Nifty futures point to a quiet start this morning, a rally in Asian markets may help support sentiment. Meanwhile, an expected increase in government spending to boost growth in the second half should help infrastructure stocks. Meanwhile, bond traders are eyeing a potential rally after weak growth data raised hopes of a rate cut by the Reserve Bank of India.

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Reviving growth depends on strong government push

The Indian economy seems to be at a crossroads. Either the government introduces large incentives to raise consumption or ramps up infrastructure spending to drive GDP expansion. Motilal Oswal Securities expects household spending to remain substandard over the next two to three years, while Marcellus Investment Advisers has warned that middle-class incomes will be affected by rising automation in workplaces. For investors, it’s time to reevaluate strategies. Consumer stocks may face headwinds, making infrastructure — or similar alternatives — a smarter play.

Capital goods stocks regain investor favour

Investors appear to have regained their appetite for infrastructure and engineering goods stocks, as sector indices jumped by 5% and 7%, respectively, over the past week. According to brokerage Antique, there has been a rise in new project announcements and tendering activity, which is expected to translate into contract awards for companies. Antique’s best bets among capex operations include NCC, HG Infra Engineering, IRB Infrastructure, BHEL, Siemens, Kirloskar Oil Engines, Transformers and Rectifiers and Hitachi Energy.

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Bulls lift Adani Green, bears surround DMart in F&O space

Among the 45 stocks that debuted in the futures and options (F&O) sector of the NSE, Adani Green Energy stood out with a 22% rise last week. On the other hand, DMart, commerce major Zomato and Avenue Supermarts closed in the red. Nuvama Wealth Management Ltd. The strategy of shorting Avenue Supermarts while remaining long on Zomato could be a rewarding trade for the December series. For companies experiencing slow earnings growth, an F&O listing is bad news because it gives bears the opportunity to target their stocks.

Analyst movements:

• RBL Bank suspends trading in ICICI Securities; 160 rupees baht
• JSW Infra rated new buy at ULJK; 411 rupees
• Cipla raised for buy in Prabhudas Lilladher; Rs 1,730

Three great reads from Bloomberg today:

• Adani says his empire will emerge stronger after US bribery case
• Trump demands “commitment” from BRICS on the use of the US dollar
• The Big Take: A roadmap through the drama and facts of Trump’s tariffs

And finally..

Bond bulls are back in the game after data on Friday showed that the Indian economy grew at the slowest pace in almost two years in the September quarter. The yield on the benchmark 10-year bond fell nine basis points to 6.74%, driven by expectations that slowing economic growth will prompt the central bank to cut interest rates sooner than expected. According to Quantum Asset Management Ltd, continued foreign inflows linked to index inclusion and strong domestic demand could see 10-year bond yields fall by as much as 50 basis points by mid-2025.

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-With assistance from Bhaskar Dutta and Kartik Goyal.

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