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It is hard to find the Yuletide spirit within when all hell is breaking loose without. We are of course talking about the market meltdown that followed the US Federal Reserve not living up to its promise of signalling a happy new year with four rate cuts for 2025. But Christmas was bound to be a bit dour this time with little in the way of cheering for even 2025, given an expected global slowdown, protracted wars, and a growing affliction among countries to de-globalise.
What investors didn’t like was Fed chief Jerome Powell resembling Krampus (the dark alternative to Saint Nicholas) rather than Santa Claus, with his numbers and words. The Fed now sees inflation slightly higher than earlier anticipated and hence just two cuts in 2025. In our Thursday’s Panorama, we highlighted what made the Fed retreat from its more relaxed view on inflation. There is one dominant factor: President-elect Donald Trump.
Blame it on Trump if 2025 seems like a deflated balloon to you. His tariff threat is already making emerging markets shaky and exchange rates are paying the price. With the Fed’s caution on inflation and rates, currencies are in for a fresh bout of pounding in 2025, as our Chart of the Day shows. India’s rupee has already hit a fresh historic low of 85 to a dollar this week and could close 2024 about 1.5 percent weak. Next year, analysts expect more pain with a further depreciation to 85.50 and perhaps more. Dollars would be hard to come by and it would take more than a neat yield spread to convince investors to bond with our debt market.
India’s equity markets are already getting deflated, and the prospect of an underwhelming year ahead is putting off investors. But Indian domestic investors are a sturdy bunch. At last count, domestic institutional investors were net buyers and even retail investors have not lost faith. Armed with mutual fund SIPs (systematic investment plans), the average Indian resembles the determined soldier who would put his entire strength, however miniscule, in keeping the market afloat.
The best strategy for the retail long-term investor is to hold on and invest in strong companies, Ananya Roy explains in her column here. “This is to say that despite retail investor support through mutual funds as well as directly in equities, fundamentals on the ground will need to show signs of improvement in order for the stock markets to rally,” she writes in her piece. The upshot is that until Indian firms show growth in revenues and profits, investors must remain circumspect on valuations.
If all the markets seem to be entering a dull period, there is one that is on fireworks. The largest cryptocurrency, Bitcoin, recently touched the $100,000 level and with Trump’s support, crypto investors are hopeful that their past anxieties and heartburn will finally pay off. Those who missed the bitcoin train, fear not. Lisa Barbora, in her piece, explains why one can board it. But she has given ample warnings that bitcoin trading is extremely volatile, and fireworks fade away rather fast, and leave only ashes for investors.
Whether investors are choosing to settle down, stick around or bolt out of the door, much of the outcome in the market is their fault. Katie Martins spells the folly of investors in this Financial Times piece, free to read for Moneycontrol subscribers. “Some fund managers will be feeling sore about this year-end beating. But Powell has done us all a favour in reminding us that next year will not be for the faint of heart, and the wisdom of crowds is not always your friend,” Martin writes.
PG Wodehouse's Bertie Wooster said it best in ‘Jeeves and the Unbidden Guest’ - “I'm not absolutely certain of the facts, but I rather fancy it's Shakespeare who says that it's always just when a fellow is feeling particularly braced with things in general that Fate sneaks up behind him with the bit of lead piping.”
Investing insights from our research team
Ventive Hospitality: Should you check into this hotel IPO?
Carraro India IPO: Leader in the space, but is the valuation justified?
Senores IPO: A B2B play in pharma generics
This week’s tactical pick is a unique play on health insurance industry
All-round beat from Accenture – will the IT rally in India gather more steam?
What else are we reading
The Nehru Narrative: What the economic numbers say
What’s the outlook for mutual fund investors in 2025?
Nehru had sidelined Ambedkar forcing his resignation and failed to protect Harijans
A solution for the conundrum of GST on food delivery charges
Markets
Tech and Startups
Fintech 2024: How Paytm, Navi went through a trial by fire, and bounced back
Technical Picks: KFin Technologies, Dr Reddy's, Gail, Birlasoft Ltd, SBI.
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