Moneycontrol Pro Panorama | Are emerging markets emerging stronger?

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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.

Flash economic data reveal that major developed economies are feeling the pain of tighter monetary policy. The US flash PMI has come in at a 26-week low while the Eurozone’s is at a 17-month low. Investors in these markets are trying to look at the brighter side, arguing that slowing growth is also helping cool price rises. That, in turn, may lead to central banks taking their foot off the brakes a bit. But that is all hope as of now and it faces off against a view that central banks, mainly the US Fed, will hammer the last possible nail to bury inflation deep. This week’s decision of the US Fed and the lip-reading that follows should give some clues to investors.

But the developed world’s dimming growth outlook could benefit India, writes Manas Chakravarty. Slower global growth has cooled prices of commodities such as crude oil, metals and even agricultural products. In turn, softening inflation could give the RBI’s Monetary Policy Committee good enough reason to support growth by not hiking interest rates sharply from here onwards.

But that alone may not be enough. Weaker global growth is a red flag for India's exports, but it has the advantage of being more dependent on domestic consumption.  “The crucial question for the Indian economy then is whether the current surge in demand is merely the result of ‘revenge spending’ and pent-up consumption demand, or is it more sustainable. Lower inflation should support consumption,” says Chakravarty. If this holds true, then along with more reasonable valuations, foreign portfolio investors could return, he says.

But Mohamed El-Erian thinks that it’s not a rising tide that will lift all emerging market boats. Writing in the Financial Times (republished in Moneycontrol and free to read for Pro subscribers), he talks about how analysts are giving a thumbs-up to the emerging markets’ universe.

He writes: “The bulls argue that, with most disruptive forces now in the rear-view mirror, a period of lower volatility and higher returns is immediately ahead of us. Cheap historical pricing is, in my view, a necessary but not sufficient condition for gainful emerging markets investing, particularly for those with little appetite for volatility.” He offers a prescription of what kind of economies to focus on or even what kind of assets to pick up, and to know more, do read. He also cautions of bumps along the journey and as if on cue, after a stellar run last week, the stock market opened the week with a slight dip as of lunch-time.

In today’s edition, you can get our research team’s views on a bunch of important earnings, such as Infosys Technologies and ICICI Bank and views on issues such as fintechs and supervisory risk, difficult to meet renewable energy targets and drying up of startup funding. More details below.

Investing insights from our research team

Infosys Q1 FY23 — Good execution with cautious optimism

Kotak Mahindra Bank Q1 FY23 – Treasury losses mar steady show

ICICI Bank Q1 FY23: Solid all-round show, re-rating to continue

Mphasis: Good quarter but valuation tempers excitement

JSW Steel: Will off-take improve as incremental capacities come up?

Coforge puts up a strong Q1 show

Persistent Q1 FY23 – Overall strong show with more order wins, confident outlook

What else are we reading?

The Eastern Window | Why Kissinger is upset over Biden's China policy

SEBI needs to discipline fintechs in bond market, quickly

Dream run of startups gets a jolt of reality

The politics of selecting Jagdeep Dhankhar as vice-presidential candidate

New RE off-take order can put Centre-state ties on a short fuse

Technical Picks: Lead, Atul, USD-INR, Tata Steel, HDFC Bank and Birla Corporation (These are published every trading day before markets open and can be read on the app)

Ravi Ananthanarayanan
Moneycontrol Pro ​