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Moneycontrol Pro Panorama | Are we looking at a rerun of taper tantrums?

In today’s edition of Moneycontrol Pro Panorama: The Fed minutes scare, decoding falling yields, stars aligning for NBFCs, riding on India’s mcap surge, IRCTC on growth track, moral dilemma for SEBI, chips shortage and Tata Motors, and more

July 08, 2021 / 03:56 PM 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.

Investors seem to be fretting after reading the minutes of the Federal Open Market Committee’s (FOMC) June meeting. The minutes have reopened the debate over when the Fed will begin tapering asset purchases.

The meeting itself saw a shift in the consensus which had expected interest rates to remain untouched in 2023. After the meeting, the consensus shifted to two rate hikes in 2023 itself. While that was a significant change, it was not altogether unexpected and the Fed chairman Jerome Powell’s soothing remarks at a press conference also calmed markets.

But the minutes of the meeting also shone more light on the participants’ thoughts over the tapering of bond purchases. The Fed has been buying a collective $120 billion of treasury and mortgage securities in a bid to provide enough liquidity, while keeping interest rates low, to support the economy as it battles the COVID-19 pandemic’s aftereffects.

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Various participants indicated that conditions to reduce asset purchases may be met earlier than expected. A stronger-than-expected economic recovery and higher inflation have surprised policymakers. But the minutes also indicated that some participants were less sure that the incoming data were giving a less clear signal and that they should wait. So, keep watching the data to see which way the consensus could shift in forthcoming meetings. Asian markets, including India, were trading a bit weak today.

Meanwhile, there is a puzzle in the US bond markets as yields are falling even as policymakers seem to be adopting a hawkish tone. You may recall earlier bond markets were signalling tighter conditions, even as the Fed was firmly dovish. Here’s today’s must-read FT selection (free to read for Pro subscribers) for an analysis on how to make sense of the downward movement in yields and what signals it sends to investors.

In today’s edition, financial services are in focus. We look at the Sumitomo-Mitsui acquisition of Fullerton India which will give the acquirer a foothold in mass-market consumer finance and MSME financing segments. But it’s not an easy sector to thrive in. Then, there’s the opportunity being thrown up by the growth in financial savings, creating opportunities for various intermediaries. Our research team takes a look at the investing opportunities this throws up.

More investing ideas from our research team:

Titan: Strong performance on a low base; shiny outlook ahead

What is the true worth of IRCTC?

Gujarat Gas: Solid, sustainable business; long-term growth story intact

What else are we reading today?

SEBI: Penalising exchanges for glitches is fine, but who will compensate the traders?

What the chip shock at JLR means for Tata Motors’ investors

How Erez Israeli revived Dr Reddy’s by focusing on costs and non-US markets

What tax collections tell us about the health of the economy

Gilt funds deliver 10% annual returns over three years: Is it time to take profits?

Technical picks: Tata Steel BSLGodrej PropertiesHPCL and Axis Bank (These are published every trading day before markets open and can be read on the app)

Ravi Ananthanarayanan

Moneycontrol Pro​
Ravi Ananthanarayanan

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