“There is a very high chance that we see a hike of 50 basis points in the upcoming Fed meeting on March 22, 2023,” Amit Jain, Co-Founder of Ashika Global Family Office Services says in an interview with Moneycontrol.
Given this scenario, he feels a consistent uptick in global stock markets will be a challenge & broadly the market will remain rangebound at least till July 2023.
Going forward, Amit, who served the Indian banking & financial services industry for 18 years, says, “There are high chances that we may see a Global Financial Crisis 2.0 any time before US Election in October 2024 because the US Fed rates are almost at the pre-2009 levels when we last saw a financial crisis across the world.”
Hence the probability of recession looks higher in the second half of CY2023, he adds.
Will the Federal Reserve end the interest rate hike at 5.5-6 percent this year given its top priority is inflation?
If you observe the last US inflation number of 6.4 percent, which was a little higher than expectations. As we all understand that the US Fed is targeting an inflation rate of 2 percent, which is much lower than the actual inflation number of January 2023.
In my personal view, the US Fed rate of interest will peak around 5.75-6 percent by the end of October 2023. While making this prediction, I am keeping geopolitical risk constant.
If the rate hike is consistent this year, then do you think the market will remain volatile and will remain far away from its consistent and stable upmove?
If you closely observe Mr Powell's speech on Wednesday then you will find, he categorically mentioned that going forward both the propensity and longevity of the interest rates cycle will be higher. Hence in our view, there is a very high chance that we see a hike of 50 basis points in the upcoming Fed meeting on March 22, 2023.
Given this scenario, we feel a consistent uptick in global stock markets will be a challenge and broadly the market will remain rangebound at least till July 2023.
If the rate hike is around these levels, then do you see any possibility of a recession in the US?
In my media interactions in July 2020, I spoke about the stagflation in the US economy post-2021, which looks like a reality now. As I recently tweeted on February 11, 2023, going forward, there is a high chance that we may see a Global Financial Crisis 2.0 anytime before the US election in October 2024.
This is because the US Fed rates are almost at the pre-2009 levels when we saw a financial crisis across the world. Hence, the probability of recession looks higher in the second half of CY2023.
Will inflation in India stay elevated for rest of the calendar year though RBI expects it at 5.4 percent in second half of this year? What is your forecast for February inflation?
India's January inflation was higher than expectations and there is a buzz in the market that RBI will continue to raise interest rates even from here on. Also, traditionally we have seen, there is a premium of 2-3 percent yield in the Indian Government Bonds over the US Fed Rates.
Keeping the current scenario in mind, the 10-year G-sec yield may peak at 8.2-8.4 percent by October 2023 and the inflation for February 2023 in India will be around 5.9-6.2 percent.
Do you think the worst with respect to Adani Group is behind? Is it the right time to pick these stocks now?
Technically, the worst is behind for Adani Group as they are getting their shares unpledged from various banks. It was a major overhang for the group. However, fundamentally we are keeping a close watch on their quarterly results going forward. Only investors with a very high-risk appetite may invest in these stocks at current levels.
What are the key headwinds for the Indian equity markets and will that headwinds bring the equity benchmarks to lows of June 2022 again in 2023?
The headwinds for Indian Markets are: Changing geopolitical power shift, the outcome of the SEBI report on Adani Group and renewed focus of the US Fed for a higher rate of interest going forward.
A combination of all three may pose a higher risk for Nifty50 and make it retest the lows of June 2022 during this CY2023.
However, at current levels, we are still bullish on Indian banks keeping medium to long-term views in mind. Also, we prefer largecap stocks over midcap ones till July 2023.
Are you betting big on PSU banks or still prefer to be selective?
In our media interaction in July 2022, we identified an entry point in the banking sector & since then it is up by almost 20 percent. Most of the private banks are up 20 percent while PSU banks are up by 40-80 percent since our entry point.
Even at current levels, we continue our bullish stance on both the PSU and the private banks.
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