Moneycontrol Pro Panorama | Getting ready to welcome Santa 

What does this mean for Indian investors?

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. 

Diwali sent a surprise gift on its way out or Christmas has come early. Either way, don’t look a gift horse in the mouth goes the saying, but here’s an (admittedly) cheesy caveat -- wait till you unwrap it fully before rejoicing.

The surprise was because just a week ago, Fed officials were jaw-boning yields up and pushing stocks down. As this Reuters report said, “They are still not sure that interest rates are high enough to finish the battle with inflation, with Powell cautioning that the Fed may get little further help in taming price increases from improvements in the supply of goods, services and labour”.

China’s economic data added to the gloom. Even crude oil sagged, adding weight to those who concluded that rates could stay up for longer, the economy may be brought to keel and assets will take a knocking in the process. There were still those who believed that inflation had been tamed and that the Fed officials were just posturing to ensure their job was not made tougher by financial conditions turning looser.

But this week’s US inflation data has hit those beliefs out of the park. As my senior colleague Manas Chakravarty asks: Is this the end of Higher-for-longer? First, there’s the data from the Bank of America fund managers’ survey that showed three-fourths of investors believe that the Fed is done with hiking. Fund managers were overweight on equities for the first time since April 2022. Cash holdings are at a two-year low.

But Tuesday’s inflation data was the proof that they seem to have needed. Headline consumer price inflation came in at 3.2 percent instead of 3.1 percent, a whisker of a miss some may say. But core inflation also fell to 4 percent against 4.1 percent. The miss may have been small, but the direction is what investors wanted to see, it seems. Adding to their hopes is some strong data from China. Asian markets were up sharply and local markets are up, too.

Now, the thing about these high-frequency data is that with every twist and turn, investors’ heartbeats race as markets do stomach-churning about-turns. That’s why a longer term outlook is required to acquire a bit more perspective on the direction we are headed in. We have none other than the celebrated FT columnist Martin Wolf, helping us with his analysis and a comfortingly headlined column: ‘The case for loosening is getting stronger’.

The problem case as he puts it, “In brief, it looks increasingly plausible that this tightening cycle has come to an end. It also looks quite likely that the beginning of the subsequent loosening is closer than central banks are suggesting. If that turns out not to be the case, there is some risk that it will come too late to avoid a costly slowdown and even a return to too low inflation. Yet none of this is certain: policymaking is now at a truly difficult point in the cycle.” Do read to know what and how, it’s free for Pro subscribers.

But what does all this mean for Indian investors? Chakravarty writes, “Two factors were holding back the Indian market—high valuations and FII selling.” The conditions responsible for one of these have changed. No prizes for guessing which one.

Investing insights from our research team

Coal India: Falling e-auction realisations play spoilsport

ZEE Entertainment: Early signs of recovery

Tata Power: Growth driven by new businesses to support the stock

Apollo Hospitals: Profitability of non-hospital businesses a key watch

Pidilite: Volumes, margins impressive in Q2

Ami Organics: Fermion contract raises FY25 earnings visibility

Tracker

Pro Economic Tracker | Festival mood brings cheer to auto, power consumption dims

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Marketing Musings: Small is beautiful in FMCG land, but for how long

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A sad end to Subrata Roy’s rags-to-riches-to-rags story

India and the UK are being too cautious in free-trade talks

Smallcap cycles: Simultaneously brilliant and vicious

Biden-Xi Summit: Challenge is to continue US-China engagements despite tensions

Remembering PRS Oberoi: A visionary who focussed on being the best

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South Korea: Lessons from an export hub’s lucky economic escape

Tech and Startups

DeepMind's GraphCast: The next generation of weather forecasting powered by Google AI

Technical Picks: Silver mini, Hindustan Copper, ICICI Bank, Voltas and
Aarti Industries (These are published every trading day before markets open and can be read on the app).

Ravi AnanthanarayananMoneycontrol Pro