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Moneycontrol Pro Panorama | ​Can somebody call the bottom by now?

In today’s edition of Moneycontrol Pro Panorama: The bounce in markets, Fintech trouble, Zomato-Blinkit, IT's defensive traits and more

June 28, 2022 / 06:26 AM IST

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.

Volatility, uncertainty, and unpredictability have been go-to words for writers and analysts tasked with writing about markets in the past few years. That’s not changed despite the market taking a bearish turn. Just a while ago, it seemed like the mother of all bloodbaths was just around the corner.

No, what you saw was a mere prelude, they said.

But the markets are on a different trip now. At 12.45 pm, the Sensex was up 1.2 percent above Friday’s close and 4 percent above its recent low made in mid-June. What is this, a bear market rally and how many dead cats will bounce before none are left? Can somebody call the bottom already?

Close

This time, the white flag waved by the bears has the “we didn’t expect inflation expectations to underwhelm” printed on it. Of course, nobody knows what bears or bulls are really thinking but it appears this is the data they are giving credence to.

Last week’s economic data has market watchers thinking that the Fed’s terminal rate, where it will be reasonably sure inflation will not cross its comfort level, may be set lower than expected. Signals that the economy is slowing and prices are falling (or that the price rise is slowing) are giving rise to this ‘feeling’ that’s finding takers in the market. Flash PMIs are indicating deceleration in the US economy and commodity prices have fallen sharply from their peaks. Inflation expectations have come lower than expected. If the slide stays in place, then some of the Fed’s concerns could get addressed even without crushing rate hikes, goes the hope.

Indeed, veteran debt fund manager Howard Marks told the FT in an interview (free to read for Pro subscribers) that he’s turning aggressive. He said “Everything we deal in is significantly cheaper than it was six or 12 months ago”. And on the market falling more? From the piece: “I think the idea of waiting for the bottom is a terrible idea,” he said. Assets could get cheaper than current valuations, “in which case we’ll buy more”.

While his views hold true for debt, the equity side too seems to be taking comfort in declining asset values. But here is where the words uncertainty, volatility and unpredictability are rolling off the keyboard. Will the world’s largest economies’ central banks really go easy on the interest rate front? Once bitten, wouldn’t they be doubly shy? And, if the economy is going to slow down, how much slower will it get?

Mid-way through writing this newsletter, Robert Armstrong’s FT write-up came in the inbox. He asks similar questions in an excellent overview of the market situation (also free to read for Pro subscribers). He concludes: “In sum, last week’s rally looks more like an example of volatility rather than strength.” And then, offers some advice: “The market, in the context of worsening economic fundamentals and uncertainty about where the Fed will stop, does look very wobbly. But Marks is right. Given all we don’t know, for those with the capital, the time to start a reinvestment plan is probably around now. Start slowly, surely, but start.”

What about emerging economies such as India? Will the fight against inflation singe growth or will we achieve a soft landing? One of the concerns of the Monetary Policy Committee is that of a wage price spiral setting in -- that is workers demanding more wages in response to inflation, which in turn leads to more expensive goods, leading to more inflation. Writing in today’s edition, Manas Chakravarty opines there’s little chance of that happening to rural wages, the main source of employment. While that’s really unfortunate for the poor workers, investors may be relieved. Read here.

Investing insights:

Zomato: Does Blinkit acquisition add value?

Fintechs at the gate – regulatory intervention to gain ground

Colgate Palmolive: Wait gets longer for this consumer stock

What else are we reading today?

A hawk eye on fintech should start with BNPL

Maharashtra Politics: Sena Vs Senapati

There is no wage-price spiral in India

IT companies’ defensive traits are holding up for now

The Eastern Window | How India prevented BRICS from adopting an anti-West stance

 

Technical Picks: VoltasAdani PortsCastor seedsStrides ArcolabONGC and USD/INR (These are published every trading day before markets open and can be read on the app)

Ravi AnanthanarayananMoneycontrol Pro
Ravi Ananthanarayanan
first published: Jun 27, 2022 06:35 pm
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