Edify Morning Scroll


*Global markets :
US stocks began the week deeply in the red as investors continued to flock to the sidelines in September amid several emerging risks for the market. The S&P 500 fell 1.7% posting its worst daily performance since May 12. It was a broad sell-off with each of the main 11 sectors of the benchmark registering losses. The Dow Jones Industrial average lost 1.8% for its biggest one day drop since July 19. The tech-heavy Nasdaq Composite dropped 2.2%.

One key reason for the fall was investors’ fear of a contagion sweeping financial markets from the troubled China property market. Investors are also concerned about brinkmanship in Washington as the deadline to raise the debt ceiling approaches. Monday’s sell-off briefly pushed the S&P 500 5% below its last record on an intraday basis, a first of this magnitude.

*Domestic markets :
Markets ended lower by 1%+ but managed to recover sharply from low point of the day. The Index moved lower for the first time in four days. Sensex after hitting a low in intra-day deals bounced back, recouping over half of the losses. It finally settled the day down 410 points. Nifty, meanwhile, tumbled 107 points. In the 30-pack index, only 9 stocks closed higher, led by Power Grid, NTPC, Sun Pharma and Titan. On the flip side; Bharti Airtel, Tech Mahindra, Bajaj Finance and Bajaj Finserv were the top losers.

Key reasons for correction in markets include i) Profit-taking after a recent sharp rally, ii) Oil prices hitting $80/bl for the first time in three years are also a concern for the markets. Companies having oil or oil derivatives as their raw material to be adversely impacted. Also, at macro level, current account deficit to be impacted, iii) Wait and watch stand ahead of September quarter earnings and iv) Multiple global factors – Fed officials have communicated increasingly hawkish signals in recent days as global supply-chain bottlenecks threaten to keep inflation elevated. Further the China’s growth slowdown and a debt crisis in the nation’s property market have also fuelled risk-off sentiment. Additionally, China’s energy crisis is shaping up as the latest shock to global supply chains as factories in China are forced to conserve energy by curbing production. Chinese manufacturers warn that strict measures to cut electricity use will slash output in economic powerhouses like Jiangsu, Zhejiang and Guangdong provinces — which together account for almost a third of the nation’s GDP — and possibly drive up prices.
For next couple of weeks, Global factors will be major driver of our markets. Meanwhile, domestic auto sales, any business updates on expected earnings & other macro parameters will have their crucial role to play. From slightly medium term perspective, Q2 earnings will start and that will have major bearing on markets along with management commentary. Expect markets to consolidate in near term while we remain positive from medium term perspective. For today, SGX Nifty indicates 100 points gap down opening for Nifty.

Quotes for the day:

“America would default for first time in history if debt limit not raised.”- Janet Yellen.

“You can’t have that amount of sustained liquidity in the system without that liquidity finding a place to go into. It may not be going into consumer inflation, but it is definitely going into asset inflation.” – Jahangir Aziz, Head – Emerging Market Economics, JP Morgan

Focus for the day:

  1. China Sep Mfg PMI

Key corporate developments/policy actions:

  1. As per IMD, cumulative rainfall is ~2% below normal.
  2. The emergency use authorisation (EUA) for Bharat Biotech’s COVID-19 vaccine Covaxin has once again been delayed by WHO. As per reports, the agency has asked for more data.
  3. Petrol price on Tuesday was hiked by 20 paise per litre and diesel by 25 paise as international oil prices neared $80 per barrel mark for the first time in three years.
  4. Telecom stocks – Reliance Jio is offering 20% cashback on certain prepaid plans. This aggressive pricing again raises concerns that industry ARPU might remain soft over the near term vs strong growth expected earlier.
  5. TCS has bagged a 5-year IT transformation contract from NORD/LB, a leading German commercial bank.
  6. LTI inks a strategic partnership with eClinicalHealth Ltd
  7. CRISIL has upgraded Bharti Airtel’s long-term rating on bank loan facilities of Rs 20,000 cr.
  8. Standard Life Investments will sell up to 5% stake in HDFC AMC, at a floor price of Rs2,870 apiece, a discount of 6.65% to the Tuesday’s closing price.

Fund Flow:
FII: (-) Rs 19.57 bn; DII : (+) Rs 1.61 bn

*Stocks to focus :

Large Cap : Abbott, Asian Paints, Divis Lab, HDFC Bank, HCL Tech, HUL, Infosys, ICICI Lombard, Maruti, Nestle, Tata Steel

Mid Cap : Aavas Fin, Amber Ent, Apollo Tyres, Gmm Pfaudler, GNFC, Mrs Bectors Food, Nalco, Poly Medicure, Polycab, Westlife Dev

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