Market Pulse | 6th September 2024

Market Pulse | 6th September 2024

ECONOMIC HIGHLIGHTS

INDIA

?India's fuel demand dips 2.6% y/y in August, diesel demand drops: India's fuel consumption in August fell by more than 2% year-on-year to 18.35 million metric tons, oil ministry data showed on Friday, with diesel demand hit due to above-normal monsoon rains. Fuel demand was down 6.7% on a monthly basis versus 19.66 million metric tons in July, data from the Petroleum Planning and Analysis Cell's (PPAC) website showed. Sales of diesel, mainly used by trucks and commercially run passenger vehicles, fell 2.5% from a year earlier and totaled 6.50 million metric tons in August. It was down nearly 10% on a monthly basis. Sales of gasoline or petrol were 8.6% higher from a year earlier at 3.36 million metric tons, and edged up nearly 2% from July. Jet fuel demand jumped 8.1% on a yearly basis and 0.7% from the previous month. Demand for bitumen, used for making roads, dropped to over 17% annually.

?Rupee gains on broad dollar decline ahead of crucial U.S. jobs report: The Indian rupee ended higher on Friday, tracking gains across regional currencies ahead of the crucial U.S. jobs report that will help investors gauge the extent of a rate cut at the Federal Reserve's meeting this month. The rupee settled at 83.9475 to the U.S. dollar, up from 83.9825 in the previous session. For the week, the rupee fell 0.1%.The Korean won led Asian currencies higher, climbing 0.3% against the dollar. Most other Asian currencies were up at least 0.1%.The dollar index slipped below 101 after disappointing U.S. private payrolls data indicated the labor market was cooling off, fuelling expectations of a weaker jobs report. The jobs data, due on Friday, is expected to sway the Fed's decision on whether to cut rates by 25 basis points or 50 bps at their upcoming meeting on Sept. 17-18. If payrolls fall below 100,000 and unemployment creeps higher, the Fed could cut interest rates by 50 bps, resulting in "big losses" for the dollar, ING Bank said in a note. Anything closer to the market consensus and a stable unemployment print would make a 25-bps cut more likely, the bank said.

?India's forex reserves hit record high: India's foreign exchange reserves?rose for a third straight week to a record high of $683.99 billion as of Aug. 30. The reserves rose by $2.3 billion in the reporting week, after having risen by a total of $11.6 billion in the prior two weeks. The RBI intervenes in the foreign exchange market to prevent undue volatility in the Indian rupee. Over the last month, the central bank likely bought and sold dollars. Changes in foreign currency assets are caused by the RBI's intervention as well as the appreciation or depreciation of foreign assets held in the reserves.


GLOBAL HIGHLIGHTS?

?Low US weekly jobless claims assuage fears of labor market deterioration: The number of Americans filing new applications for jobless benefits declined last week as layoffs remained low, helping to allay fears that the labor market was deteriorating. The weekly jobless claims report from the Labor Department on Thursday, the most timely data on the economy's health, also showed unemployment rolls shrinking to levels last seen in mid-June. It reduces the urgency for the Federal Reserve to deliver a 50 basis points interest rate cut this month. Economists shrugged off other data showing private employers hired the smallest number of workers in August. Most expect the U.S. central bank to kick off its easing cycle with a quarter-point rate reduction as domestic demand remains solid. A step-down in hiring, which pushed the unemployment rate to near a three-year high of 4.3% in July rattled investors and fanned concerns that a recession was stalking the economy.

?UK services activity at four-month high in August, PMI shows: Britain's services activity grew last month at the fastest pace since April and price pressures eased, according to a survey that pointed to a more benign inflation outlook and a settling of the economy after July's elections. The S&P Global UK Services Purchasing Managers Index rose in August to 53.7 from 52.5 in July, above a preliminary estimate of 53.3. Cost pressures for services companies and their selling prices increased at the weakest rate since early 2021, something that will be welcomed by the Bank of England ahead of its Sept. 19 announcement on interest rates. The central bank cut borrowing costs last month for the first time since March 2020, to 5.0% from a 16-year high of 5.25%. Investors expect another cut before the end of the year.

?German industrial output slumps, fueling recession fears: German industrial production fell more than expected in July, driven mainly by weak activity in the automotive sector, spurring fears that Europe's largest economy could contract again in the third quarter. Production fell by 2.4% compared with the previous month, the federal statistics office said on Friday. Production dropped by 8.1% in the automotive industry, weighing on the overall result. In June, automotive production rose 7.9%. On a less volatile three month on three month comparison, production in May-July fell 2.7% compared with the February-April period. "Weakness in German industry is one of the main reasons why we expect the German economy will broadly stagnate in the rest of this year," said Franziska Palmas, senior Europe economist at Capital Economics. The foreign trade balance showed a surplus of 16.8 billion euros in July, down from 20.4 billion euros in June. German exports rose by 1.7% in July compared with the previous month, while imports rose by 5.4% on the month.

?Japan's service activity extends gains in Aug, PMI shows: Japan's service-sector activity extended gains in August, a private sector survey showed on Wednesday, thanks to an uptick in overseas sales despite a darkening global outlook. The final au Jibun Bank Service purchasing managers' index (PMI) was unchanged at 53.7 last month, staying above the 50.0 line that separates expansion from contraction for a second consecutive month. While the headline figure was in line with July's reading, service companies' new business growth slowed from the previous month. But export sales rebounded from a contraction in July to the largest rise in three months, supporting overall service-sector business. That marks a contrast to Japan's manufacturing PMI for August released on Monday, which indicated?the weakest exports in five months on weak demand in China, South Korea and other key markets.


MARKET HIGHLIGHTS

?Indian shares post worst week in three months:The blue-chip indexes lost about 1.5% this week, snapping a three-week winning streak and easing off record high levels hit on Monday after latest U.S. economic data raised fears that the Fed has perhaps waited too long to lower rates.

?Vodafone Idea shares crack over 13% after Goldman Sachs expects stock to fall to ?2.5:?Shares of Vodafone Idea Ltd. declined as much as 14% on Friday, reaching an intraday low of ?12.92 from the previous day's close of ?15.06. This sharp decline was seen after global brokerage firm Goldman Sachs recommended a ‘Sell’ rating on telecom service provider Vodafone Idea Ltd. The brokerage has a price target of ?2.5 per share on the stock. The recent price target implies a potential downside of over 80% from the stock's last closing level on Thursday.

?SBI Life stock scales new high; up 13% in 3 days on strong Q1 performance:?Shares of SBI Life Insurance hit a new high of Rs 1,777.40, as they surged 5 per cent on the BSE in Friday’s intra-day trade. The stock of life insurance company was trading higher for the third straight day, and has rallied 11 per cent after the company reported a strong performance for the June quarter (Q1FY25). SBI Life reported a 34.3 per cent year-on-year (YoY) increase in net profit at Rs 519.52 crore during Q1FY25, backed by healthy growth in premiums. Its value of new business (VNB) increased 12 per cent YoY to Rs 970 crore in Q1FY25 as against Rs 870 crore in Q1FY24.

?Zomato shares surge 7% after JPMorgan projects stock to touch levels of ?340:?Shares of food delivery aggregator Zomato Ltd. surged as much as 6.5% on Thursday after brokerage firm JPMorgan increased its price target on the stock to ?340 from ?208 earlier. JPMorgan wrote in its note that Zomato is spearheading a rapid retail consumer transformation through its convenience and selection-focused Quick Commerce business with ambitious rollout plans. Zomato's quick commerce business?Blinkit, which it had acquired, is now targeting 2,000 dark stores by 2026, while also remaining profitable in the process.

?EaseMyTrip?shares zoom 11% after company announces plans to enter into electric bus making:?EaseMyTrip?shares surged nearly 11% on Thursday after announcing its entry into the electric bus manufacturing sector through its new subsidiary, Easy Green Mobility. The company plans to invest Rs 200 crore in R&D and production, aiming to capture a significant share of India's growing EV market by localizing production and offering advanced technology solutions.

?Coal India shares extend losses for 4th straight day after August production declines 11.9% YoY:?Shares of Coal India Ltd shares declined more than 3% on Wednesday, September 3, after the company posted a year-on-year (YoY) decline in its coal production for the month of August. Coal India’s production declined 11.9% YoY to 46.1 MT compared to 52.3 MT in the same month of the preceding year. Five of Coal India’s subsidiaries, Bharat Coking Coal Limited (BCCL), Central Coalfields Limited (CCL), Northern Coalfields (NCL), Western Coalfields (WCL), and South Eastern Coalfields (SECL), also posted a year-on-year decline in coal production ranging from 8% to 28%.

?India’s demat count now exceeds population of countries like Russia, Mexico and Japan:?A total of 42.3 lakh new demat accounts were opened in August - a month that saw heightened stock market volatility - pushing the total to 17.11 crore. Data from depositories showed that the addition was marginally lower on MoM basis, but was significantly higher compared to last year.


SECTOR HIGHLIGHTS


?Barring FMCG & Consumer Durables, all the major sector equity indices log weekly losses. For the week, State-owned banks, Energy, Metal and Auto stocks were among the top sectoral losers by percentage, dropping between 2.5% and 5%.

?Mazagon Dock, GRSE, other defence stocks gained on Wednesday as DAC greenlights procurements worth Rs 1.44 lakh cr. Cochin Shipyard, which has tanked 24% in the last month and 8% in the last two weeks too gained this week for 3 straight sessions.

?Crude Oil Prices Fall — HPCL, Asian Paints shares surge but selling pressure in ONGC, Oil India. Paint companies gained since they use crude oil as a key input component for manufacturing and a drop in a key input component will lower costs and thereby aid margins going forward. On the flip side, oil prices falling are negative for ONGC and Oil India as it adversely impacts their margins. The price of the products refined by them may not fall as quickly or in proportion to the fall seen in crude oil prices and hence, refineries which have held inventories bought at higher prices may face inventory losses.


BUSINESS-INDUSTRY UPDATES

?Raymond Lifestyle Listing: Shares debut at ?3,020 on NSE after demerger: Raymond Lifestyle Ltd., the demerged retail and lifestyle division of Raymond Ltd, made its market debut on Thursday, September 5. The stock listed at a premium of 93.3%, at ?3,020 on the NSE. This is the first step in the scheme of arrangement announced by Raymond, in which it plans to eventually have three separate listed businesses.

?DTC and staples snapped up, FMCG companies are gunning for snacks now:?Snacks seem to be the next big thing when it comes to mergers and acquisitions (M&A) in the Indian FMCG sector. Britannia is reportedly in talks to acquire Guwahati-based snacks maker?Kishlay?Foods. Last year, ITC acquired healthy snacks brand Yoga Bar and there have been reports of some of the leading FMCG players considering buyouts of some snack companies.







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