Dear Reader,
In last week’s edition of MC Pro Weekender, we wrote about how bond markets asserted their superiority when hawkish Fed minutes and a buoyant private jobs report scared bond yields into rising. Later in the week, however, US non-farm payrolls report poured cold water over those flames as they were below expectations. That put the smiles back on investors’ faces, and they remained in place this week.
Global food inflation largely remained in check in June with the FAO food price index declining. However, domestic food inflation did increase with the month-on-month increase food prices at 2.5 percent. Pulses and vegetable prices have been moving up sharply. Uneven rainfall remains a risk for agriculture, although the situation has improved, as our monsoon tracker pointed out.
The silver lining in domestic inflation data was that core inflation headed lower. My colleague Manas Chakravarty pointed out that if this was the good part in the inflation data, then US inflation provided a beautiful backdrop, with US CPI at a seasonally-adjusted 0.2 percent over a month ago and up 3 percent over a year ago. “The odds of an Immaculate Disinflation, or a soft landing, have gone up,” he wrote.
Matching inflation-watchers’ passion in the market are recession-watchers. But their wait is getting longer, and as Ajay Bagga pointed out the most anticipated recession has turned into the most postponed one. “With the US economy delivering a GDP growth of 2 percent in Q1 and the Atlanta Fed GDPNow forecasts running at 2.1 percent for Q2, the probability of a 2023 recession has receded to a low 25 percent to 35 percent in most analysts’ forecasts,” he wrote. A soft landing for the US economy appears to be on the cards, and is the best scenario investors could have hoped for.
As equity indices wind their way up, those who have missed the early bus may think it’s too late to join the party. Those on the bus, however, may be thinking it’s time to make their way to the exit. Sometimes, we sell at the bottom or buy at the top. How our brain is wired has a lot to do with how we make these crucial financial decisions.
Vijay Bhambwani writes about the behavioural aspect of investing and quotes research in saying, ‘Asians, Hispanics, Africans and Middle East residents have a higher emotional quotient (relatively greater degree of emotional thinking compared to mathematical thinking). This emotional behaviour makes us rush in and out of trades and makes our financial markets more volatile on global rankings’ charts’. While that gives reason to be relieved that we are not alone, it’s time for a course correction.
There’s more on this subject. Renowned investor Howard Marks wrote in the FT about taking the temperature of markets and how understanding investor psychology is key to long-term investment returns. He gives solid insights that can be very helpful for investors. Here’s a sample: ‘How should investors think about market timing? I believe every investor should operate most of the time in their normal risk posture — the balance between aggressiveness and defensiveness that is right for them.’ Do read, it’s free for MC Pro subscribers.
If macro worries continue to recede, then investor attention will shift to the micro factors and earnings will be the main one to watch out for.
The domestic earnings season has already begun with IT biggies such as TCS and Wipro reporting numbers. Their results point to difficult times for IT companies, but since these were expected they appear to have been priced in and investors are not reacting adversely to results. Here’s our research team’s take on their results: TCS, Wipro and HCL Tech. For an in-depth company view on TCS, do read the CEO’s view, exclusive to Pro subscribers: Need a quarter or two before we can say difficult times are behind: TCS CEO Krithivasan.
Here’s the Street’s view on earnings growth and valuations. What about which sectors are likely to do well and which may not, and what risks should investors be keeping an eye out for? Read: What to expect from Q1 earnings?
If you are among those investors who prefer handing over their money to fund managers, then this interview with Shridatta Bhandwaldar of Canara Robeco AMC, a fund house that has been consistent despite fund manager churn, gives insights on the AMC’s investment strategy and what sets it apart. Exclusive to Pro subscribers.
Cheers,
Ravi Ananthanarayanan
We have put together a power-packed edition for our subscribers this week, with topics ranging from investing insights, opinion pieces and exclusive pieces and interviews from the markets, personal finance and tech/startup sections. Details below.
Investing insights
Metals and Mining: June 2023 quarter likely to be muted
Engineers India: Stock set to ride on earnings, valuations support
Should investors subscribe to Utkarsh Small Finance Bank IPO?
Subros: multiple tailwinds at play
Engineers India: Stock set to ride on earnings, valuations support
This NBFC offers multi-year growth opportunity
NCC Limited: Will re-rating sustain for this construction player?
Can Persistent System continue its outperformance?
Federal Bank Q1 FY24 – A weak quarter doesn’t alter the long-term investment case
Discovery Series: Is this smallcap stock a good play on the China-plus one theme?
GM Breweries: Q1 steady, margins may feel the pinch Weekly Tactical Pick: This mid-sized cement player has aggressive growth targets
Personal Finance
Looking for value: Time to buy healthcare funds?
Is credit risk worth the return premium it offers?
Made multiple wills? Don’t make the mistake that Aretha Franklin did
Final approval for mutual fund expected in 4-8 weeks: Zerodha CEO Nithin Kamath
ITR filing: How to file income from capital gains or set off capital losses
Markets
BSE Buyback: Gun for a quick buck or look at the bigger picture?
Is promoter selling always a reason to worry?
The days of the rock star research analyst are long gone (FT)
Chart of the Day | Why PE funds are shying away from investing in India
How to catch a rogue finfluencer? SEBI needs a hand from social media platforms
Chart of the Day: What the divergence in equity flows portrays
Why Prashant Khemka thinks holding even over 100 stocks in portfolio is okay
Investors in this SME IPO got full allotment despite oversubscription. Here’s what happened
Tech & Startups
In the past 20 years, I have not used IRR even once to make an investment decision: Vinod Khosla
IT firms’ generous payouts under threat as slowdown begins to bite
Should TRAI start regulating OTTs such as WhatsApp, Telegram and Signal?
Swiggy has no control over valuation markdowns, says food marketplace CEO Rohit Kapoor
Technical Analysis
In The Money | Track pulse of the market using Implied Volatility
GuruSpeak | Consistency above profitability is Ashish Chotai's mantra for trading Economy & Agriculture
The ideology of inflation: Many questions beg for an answer Why China is flirting with deflation as the west battles rising prices (republished from the FT)
Pro Economic Tracker | Labour participation, consumer sentiments dim
Demolishing the house that Mahalanobis built Help farmers throw away the MSP crutch
What's behind India’s record low cotton production forecast?
Geopolitics
The Eastern Window: US remains politically aggressive towards China, but ready to soften trade rules Banking and fintech
Chart of the Day | Home loan growth could plateau in coming months
Utkarsh Small Finance Bank’s IPO will test investor interest in microfinance
As fintechs give a new look to the old game of lending, banks must be vigilant
Fintechs jump onto digital lending frenzy as disbursement volumes double in FY23
Companies and industry
Marketing Musings: Would you buy wine sold in jerry cans? How investors should view Vedanta’s semiconductor and display fab foray
India a bright spot in steel, but will it reflect in earnings?
Patanjali Foods’ OFS will see promoters laugh all the way to the bank
Industry is yet to recover fully from the pandemic blow, just look at IIP numbers
GST On Gaming: A tale of Shakuni Mama vs Yudhisthira
Online gaming doesn't need GST hike vilification but more acceptance
Semiconductor push — Is it back to square one?
Foxconn-Vedanta deal breakup brings out government’s dilemma in picking national champions
Are India’s metro rail projects transit solutions or real estate plays?
The dismal state of power discoms threatens India’s energy dreams
Chart of the Day | Thermal power plant utilisation levels steady, despite moderation in demand
Disruptive forces at play in two-wheeler sector
Climate
Climate funding — Will the UN report act as a wake-up call? The Green Pivot: China is painting its industries green with an enviable finance strategy Don’t fight floods, learn to live with them
Republished from the FT (free to read for MC Pro subscribers) The West must recognise its hypocrisy
Apple/China: tech trade war has not halted a deepening relationship
Disney: Ascent of the Iger will hamper House of Mouse
Others
Auditors are under fire from the NFRA
Chandrayaan-3: The future of India’s lunar and space exploration hinges on this mission
Politics
Shadow of Maharashtra NCP rebellion, heartland churn loom large over Opposition’s Bengaluru meeting
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