Moneycontrol Pro Panorama | Macros in a twist

The RBI has done its bit—cutting rates, easing liquidity, and stepping back to let the economy respond.

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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.

“India 10-year bond yield at 6.20% pa. US 4.60%. Gap of 1.60% is probably lowest I recollect. Will we 1 day see Indian yields lower than the US?” is the question banker Uday Kotak asked on X earlier today. Judging by the jitters in the stock market, it appears investors in India too are weighing the implications.
One of the reasons causing jitters in the US bond market is Moody’s downgrade of the country’s credit rating, which we had written about in Monday’s Panorama as well. In today’s edition, our columnist Sashi Sivramkrishna calls for a calmer view of the situation.

While the screaming headlines appear to have swayed bond market mavens, he writes, “While future movements remain uncertain, a significant rise in yields appears unlikely, provided broader macroeconomic conditions remain stable.” He points out that this is due to how mainstream macroeconomic models work, but what’s crucial is to remember that government debt is not the same as private debt. To know more about his contrarian viewpoint even as bond yields have risen, do read here.

US equity markets too appear to have been spooked by the rise in bond yields. They have one eye on the tax cuts bill that is being shepherded through Congress, with some last-minute amendments being made to make it more acceptable to Republicans. But could it be something else that’s worrying investors?

This FT article (free to read for Moneycontrol Pro subscribers) by Katie Martin writes about whether the era of American Exceptionalism is over. Investors are not waiting for conclusive answers to that question, hedging their bets in other markets. Europe has yielded healthy returns for seekers of alternative markets. Martin highlights how various forces came together to create a force behind valuations that far exceeded fundamentals. While the current market underperformance could turn out to be a blip, but it would be “complacent, arrogant even, to dismiss that risk”, she writes. Do read.

Why should Indian markets take fright from rising US bond yields? This week has seen markets turn skittish. Higher US bond yields could see flows taper as they are getting better risk-free returns in that market. Considering that the Q4 earnings season has provided a mixed picture at best, of corporate performance, and Trump’s tariffs have cast a cloud over what lies ahead, domestic equities will need more drivers to keep investors interested.

Even domestic investors are not immune to these doubts. Consider what Morgan Stanley’s base case target for the Sensex is a year from now, which at 89000 implies a 9.5 percent increase from the May 20th level. HDFC Bank offers a Fixed Deposit at 6.6 percent for this tenure. Is the equity risk premium sufficient to put money in the stock market instead of putting it in an FD in a reputed bank? Of course, Morgan Stanley also has a bull case of 100000 that offers a return of 23 percent, which then compensates adequately for the risk being incurred. In an interview done by my colleague N Mahalakshmi, Enam Holdings’ Sridhar Sivaram points to the macro environment not being supportive of a rally and says it’s time to protect your capital.

Finally, on the macro, Q4 GDP data should add to the view provided by corporate earnings of how the economy is faring and what we can look forward to in FY26. Manas Chakravarty points out the crucial takeaways that investors should be watching out for, apart from assessing if growth rebounds sharply, as implied by the second advance estimates for FY25. If the data provides comfort, then that could provide some support on the macroeconomic front for investors.

Investing insights from our research team

IndusInd Bank – Is the worst over?

Indigo — Will the airline’s performance continue to fly high?

Is Cantabil the next retail growth story?

Repco Home Finance: Sustained loan growth to drive re-rating

What else are we reading?

IndusInd Bank unearths fraud, investor confidence to hit rock bottom

Chart of the Day | Sugar output slips in 2024-25 but it’s not a bitter harvest

Decoding Economics: Are consumer sentiment surveys misleading?

Whirlpool puts up a decent show amid parent’s stake sale overhang

Shashi Tharoor: Suitors aplenty but no great options

Banking on AI: How financial institutions can stay ahead

Government purchases don’t need aatmanirbharta; foreign firms are required

Markets

India’s defence firms post solid Q4; analysts warn on valuations, order visibility

Tech and Startups

'I don’t think there’s been a time like this': Google's Sundar Pichai on tech's unprecedented pace
Technical Picks: RELIANCE, SUN PHARMA, SKIPPER, LTFOODS.

Ravi Ananthanarayanan
Moneycontrol Pro