Moneycontrol Pro Panorama | Taper fears grip equities after initial calm

Cryptocurrency (Representative image)

Dear Reader,

The US Federal Reserve may have been a bit behind the curve compared to central banks of other developed countries in tapping the taper brakes. It played catch-up this week, with the FOMC decision to step up the pace of taper and bring forward rate hikes. But the Fed’s pivot appears to have emboldened its peers to do more.

The Bank of England increased interest rates from 0.1 percent to 0.25 percent in spite of a spike in COVID-19 cases in the country. The European Central Bank also said it will roll back its stimulus in the coming quarters, putting pressure on the dollar on Friday, as their statements were perceived to be more hawkish than expected. The Bank of Japan too decided to roll back its stimulus funding but maintained an ultra-loose policy and extended financial support for small firms, said a Reuters report.

Whether it was the central bank moves or something else, Asian markets dipped on Friday and India’s equity markets have followed suit. Was the surprisingly calm reaction to the Fed’s change of stance a temporary one is a question that shall be answered in the coming weeks and months. In today’s edition, Shishir Asthana writes on the market reaction to the 2013 taper and how Indian equities performed and how the 2021 taper is likely to play out. Read to know what to expect.

If interest rates are low and equities are set to underperform even as inflation is trending higher, which asset class will investors find shelter in? Hedge fund manager and investor Ray Dalio told Yahoo Finance that he believes cryptocurrency can be part of an investment portfolio to hedge against the dollar that is depreciating in real terms. But he also believes that central banks would try to “kill crypto” if it’s successful. Meanwhile, here’s a report on the National Bank of Kazakhstan’s pilot of a central bank digital currency, the digital tenge. They are optimistic on its use case and that it could help financial inclusion and plan to continue studies till July 2022 and then decide on a launch by end of 2022.

On a related but lighter note (except for the seller), the owner of a Bored Yacht Club Ape non-fungible token sold a $300,000 token for $3000 in a fat-finger trade that could not be reversed in time, writes the Financial Times in this report (free to read for Pro Subscribers). Owners of these tokens meet and even partied on a yacht, and inner circle access brings privileges such as:” dividend-like drops of other items to members of the club. Owners were allowed to adopt dogs with traits like their own apes, and in August were given digital vials of “mutant serum” to create a mutant ape. Those animals are NFTs in their own right, fetching thousands of dollars.” Is this how a metaverse looks?

Investing insights from our research team

Tactical pick: Manappuram Finance

Defence shipbuilding stocks: Time for higher growth and a possible rerating

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Technical picks: Godrej Industries, Infosys, Indusind Bank and BHEL (These are published every trading day before markets open)

Ravi Ananthanarayanan

Moneycontrol Pro