Moneycontrol Pro Panorama | Fledgling Hawk

“The sky today may be overcast with clouds, but we will use all our energies, resolve and resources to let the sunlight illuminate India’s future.” (Image: Reuters)

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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.

Rates unchanged. Accommodative policy stance retained. The Reserve Bank of India (RBI), in its first monetary policy committee meeting for fiscal year (FY) 2023, may have sounded dovish, but there is a distinct underlying tone of hawkishness, which sets the stage for rate hikes sooner than later.

The central bank took cognisance of “new, humungous challenges” in the wake of the Russia-Ukraine conflict and with the pandemic still in the rear-view mirror. Amid spiralling commodity prices, continued supply-side shocks and rising crude oil prices, the task of propelling growth and containing inflation has become even more daunting.

For FY2023, it revised its inflation forecasts up from 4.5 per cent to 5.7 per cent and marked down GDP (gross domestic product) growth from 7.8 per cent to 7.2 per cent.

According to some economists, further upsides to inflation cannot be ruled out. At the same time, raising interest rates could kill demand drivers in the economy. My colleague Ravi Krishnan in his First Take on the MPC decision wrote about the new Standing Deposit Facility that could help reduce excess liquidity in the system. The MPC also unanimously agreed to begin withdrawing accommodation to ensure that inflation is within target even as it needs to support growth.

A note from Barclays Emerging Markets Research says, “Based on today’s moves, we believe that if growth risks do not rise and the inflation outlook does not improve, the RBI will change its policy stance to neutral in the June MPC meeting, setting the stage for a short rate hiking cycle in H2 2022.”

Be that as it may, equity markets showed stability with major indices in the green. Investors will get a clearer picture of the ground realities when the March quarter (Q4) results for FY2022 unfold in the days ahead. Expectations are of decent revenue growth but margin compression due to unprecedented inflation. Key sectors such as automobiles have been victims of supply chain disruptions while others such as fast-moving consumer goods are weighed down by inflationary conditions softening demand.

Will things turn around soon? An Asian Development Bank report spells optimism, forecasting a Goldilocks scenario for the Indian economy -- strong growth with inflation within the RBI’s target range (read here). It is hopeful that investment, especially government investment, will be a key driver and that government capex will crowd in private investment. But, given the uncertainties still looming, this forecast can be taken with a pinch of salt.

For now, as RBI Governor Shaktikanta Das, quoting Mahatma Gandhi, said, “faith steers us through stormy seas”. That seems to be an accurate description of the markets.

Investing insights from our research team

MC Pro Weekly Tactical Pick: This mid-tier IT company has shown resilience

Mphasis: Is it the right to time buy the high-growth company?

CEAT: A worthy investment bet

What else are we reading?

What the IDFC MF deal means to the AMC sector

With FIIs back, their darlings beckon

Amid COVID recovery, megamergers will be commonplace

Sri Lanka’s downhill journey and lessons for India

Algo Rhythm: The 7th stage of algo trading

A taste of colour in the metaverse

Russia-Ukraine Crisis | India braves Western pressure, abstains from UNGA vote 

Herd Immunity Tracker: New variant not a concern as of now

The lesson humble sea urchins offer about economic resilience (republished from the FT)

And in Personal Finance:

Leveraging -- a risky but cost-efficient route to build wealth
Technical Picks: Tanla, Shilpa Medicare, Mawana Sugar, Tata Motors and Crude oil  (These are published every trading day before markets open and can be read on the app)
Vatsala Kamat Moneycontrol Pro​