Before market trading begins, we present a summary of the key news and events anticipated to impact markets. Today’s focus includes:
- Deepening IT sector slump
- Increased demand for banks
- Traders preparing for RBI announcements
Indian equities are expected to see a positive opening after six consecutive days of declines, bolstered by gains in Asian markets and US equity futures. This relief rally may extend to the bond market, especially with the government’s decision to reduce long-term bond supply. The primary concern for bond traders this week is the RBI’s upcoming interest rate decision scheduled for Wednesday. Investors are also hopeful that President Donald Trump will refrain from further disruptions following recent turbulence affecting the IT and pharmaceutical sectors.
IT Sector Faces New Challenges
The IT sector is experiencing ongoing difficulties. An index of IT stocks fell for the sixth consecutive session on Friday, marking the longest decline since February. This downturn follows Accenture’s lackluster performance commentary and growing concerns over the H-1B visa fee increase. Analysts from Antique highlight a challenging demand environment in the near term, indicating that a significant upswing in demand may be at least a quarter or two away. Recovery in stock pricing for these companies will depend on improved discretionary spending and deal conversion rates, with HCL Technologies, Coforge, and Mphasis receiving favor from analysts.
Focus Shifts to RBI for Bond Traders
While equity markets grapple with specific sector issues, fixed-income traders are concentrating on the actions of the central bank. A projected 25 basis point rate cut this week, accompanied by indications of further easing, might reduce the 10-year yield by as much as 30 basis points, as per Union Bank of India forecasts. PGIM India Asset Management anticipates a smaller 10 basis point drop if the RBI merely adopts a dovish stance but warns that no rate change could trigger selling. The recent reduction in long-bond issuance over the next six months, while keeping the overall borrowing plan intact, has alleviated supply concerns. Despite expectations that the RBI will maintain rates during its October 1 meeting, some traders are predicting a cut. Current yields have remained relatively stable over the past three weeks, confined within a narrow eight-basis-point range.
Stability in State-Owned Banks
Within this context, some investors are seeking stability in the financial sector. Analysts at Motilal Oswal suggest a potential for a “gradual but meaningful” revaluation of state-owned banks, attributing this to improvements in balance sheets, better asset quality, and increased operational efficiency. Despite near-term earnings facing margin pressures, public sector banks are currently trading at reasonable valuations. Analysts note that healthy capital levels and conservative provisioning standards mitigate historical asset-quality challenges. Motilal’s preferred selections include State Bank of India, Punjab National Bank, and Indian Bank.
Analyst Movements
In terms of analyst ratings:
- Paytm has been upgraded to Buy by Mirae Asset Securities with a price target of 1,340 rupees.
- Crompton Greaves was downgraded to Reduce by Avendus Spark, with a price target set at 314 rupees.
- IndusInd Bank has been raised to Equal-Weight by Morgan Stanley.
Just as Indian stocks appeared to stabilize, President Trump announced further changes that impacted markets. The MSCI India Index has declined for five consecutive sessions following his proposal to reform the H-1B visa program, directly affecting India’s $280 billion IT sector. Additionally, a plan to impose 100% tariffs on branded pharmaceuticals has further pressured pharma stocks. Investors are now reassessing their expectations for a year-end rally, as foreign investors have returned to a selling stance after a brief period of purchasing.
More stories can be accessed at bloomberg.com.
Published on September 29, 2025.
