Moneycontrol Pro Panorama | Equities face the heat as risks come to the fore

​Dear Reader,

The Panorama newsletter is sent to Moneycontrol Pro subscribers on market days. It offers easy access to stories published on Moneycontrol Pro and gives a little extra by setting out a context or an event or trend that investors should keep track of.​

Inflation is back on the front foot. Wholesale price inflation in February skipped an entire percentage point, jumping from 2.03percent in January to 4.17percent in February. Not surprisingly, fuel and power costs are one main reason for the increase, with inflation of this sub-group rising from -4.8percent to 0.6percent. In fact, the steep increase in energy costs appears to be showing up on consumption trends, as we note in: Drop in fuel use is a wake-up call for the government.

Food inflation was another major contributor to the increase. Meanwhile, inflation in manufactured products shows a steady uptrend, and is at 5.81percent in February compared to 5.13percent in January.

This will do little to cheer up equity investors who are anyway having a rough start to the week, with the Sensex down by 1.8percent at the time of writing. Stubbornly higher US bond yields are sending jitters down the market’s spine with not much expectation that this week’s US Federal Reserve meeting is going to turn up anything material to change their outlook. Asian equities are wearing a dull look. It does not help that India’s daily case load continues to rise, even if restricted to a few states—these happen to be major contributors to the economy.

Today, a Nomura note titled ‘India: Goldilocks walks out the door’ talks about how the RBI may still retain its accommodative stance in April but that rising inflation and normalizing domestic output are creating conducive conditions for an exit.

‘In our base case, we expect the RBI to keep its policy repo rate unchanged in 2021. However, we expect the process of liquidity normalisation to begin in mid-2021, the policy stance to shift to ‘neutral’ from ‘accommodative’ in Q3 (July-September), and a 25bp reverse repo rate hike in Q4. This is likely to be followed by 50bp worth of repo rate hikes in H1 2022, with risks skewed towards further hikes.’

The US markets may not be the only ones to throw a tantrum, if these projections prove to be right.

If you are wondering how to navigate markets, here’s a veteran fund manager’s view: Interview | Current valuations rich, but some upside still left, says MD of Quantum Advisors.

Here are today’s investment insights from our research team:

Craftsman Automation IPO: Is this fundamentally strong company good to ride on?

Laxmi Organic IPO: A leader in basic chemicals, doubling down on speciality

Why CDSL is the best stock to play the booming capital market

What else are we reading today?

AT-1 bonds are for risk takers. Small investors should know that.

Semiconductors: The chips are down, and India is vulnerable

Basic customs duty on solar modules — Plugging into a new brand of protectionism

Biden stimulus package adds fuel to sweeping stock market shake-up (republished from the FT)

Why are investors exiting short-term debt mutual funds?

Technical picks: Maruti, Laurus Labs, LIC Housing Finance and Bank Nifty (These are published every trading day before markets open and can be read on the app)

Cheers,

Ravi Ananthanarayanan