Moneycontrol Pro Panorama | China shadow on markets; is India’s glow burning bright?

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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.

Last week’s tepid closing has carried over to this week. The broad market is down by 1.1 percent at 1.20 pm and appears to be giving company to a downtrend visible in Asian markets today. China’s economic woes could be one factor playing on investors’ minds in the region. That has put commodity prices on the back foot with the ailing property sector becoming a chief cause of concern. Ongoing weather-related disruptions to industrial output are another risk.

Monday saw China’s central bank announce a few more rate cuts in a bid to give more support. Will these be reason enough to revive growth is the question. The question over China’s economic health comes even as President Xi Jinping is expected to be re-elected for a third term. In today’s edition, the Eastern Window casts no doubt on Xi’s re-election, but there is the matter of whether he will be allowed to handpick his core team. Read why this time around, it may not be left to Xi to decide and what that means.

Even the US economy, the world's largest one, is headed for a recession and all eyes are on this week's gather​ing of central bankers at Jackson Hole, to see what Fed chair Jay Powell will say about the inflation versus recession risk trade-off. But as actions go, investors are placing their bets on a slowdown if not a downright recession for the US economy.

Today’s FT selection (free to read for Pro subscribers) says big investors in the US market are developing a taste for growth stocks and rotating out of value stocks. US-listed growth-focused ETFs saw net inflows of $4.9 billion in July while value ETFs saw their first net outflow in 11 months. Read for more.

That brings us to India. One parameter foreign investors watch is relative valuations and, on that count, India appears to be expensive relative to EMs. However, a deteriorating China outlook could well be making India look better in relative terms to investors. And, this may explain why foreign portfolio flows to India have improved.

The slowdown in China -- along with a slowdown expected in ​other major economies -- has also soured the outlook for a range of commodities, from softs to metals to crude oil to edible oils. While this may be bad news for producers, for consumers it's great news. On that front too, India is a potential gainer as lower input costs could see a range of consumer products turn cheaper.

Already, on the domestic front, there is some good news for consumers, as an ET report points to consumer companies cutting prices of basic items of consumption from as basic as biscuits to consumer durables such as televisions and even mobile phones. The steep increase in prices—either by price hikes or through lowering grammage supplied in FMCG packs—is seeing consumption suffer. A cut in consumer goods’ prices will be good for manufactured inflation as well.

Companies had indicated that they expect margins to recover in the second half of FY23. How much of the input costs they can retain and how much they will be compelled to pass on is the critical question. Their fate lies in the marketplace. If a combination of lower inflation and higher economic growth leads to a broad revival in consumption, that could be good news for the economy. China's problems may lead to unintended benefits for India.

Investing insights from our research team
JSW Energy: Back on the growth circuit

Vedanta: Is higher dividend yield the only draw?

Hikal: Is the worst over?

What else are we reading?

Let the markets decide the need for bank privatisation

Two-wheeler giants soup up electric play, but it's a tough ride ahead

Can Centre’s shock therapy cure long-term power ills?

Delivering safe tap water to all is first step towards prosperity

Erratic weather poses risk to farm inputs sector

Tata Sons-Tata Trusts | Separate heads for both will not solve the problem

Geopolitical factors have led to inflation, but the headache is ours

India-China Ties: New Delhi needs to deal with Beijing's aggression and stay relevant

Technical Picks: ONGC, Guar seed, Jindal Steel Power, KPR Mill, Wockhardt and USD-INR (These are published every trading day before markets open and can be read on the app)

Ravi Ananthanarayanan
Moneycontrol Pro