Moneycontrol Pro Panorama | As markets dither, a mega IPO waits in the wings

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.

‘Don’t time the market’ is a phrase investors often hear. When it comes to raising money, however, timing does matter. The start-ups who raised money at the peak had it going better compared to those who came after some of the hot IPOs fizzled after listing, notably Paytm. The same investors who were less questioning of high valuations have become more discerning.

Mispricing and public market investors being new to the business models of startups chasing growth and scorning profits may be a few reasons. The external environment has become less conducive, too. Taper season is upon us. The US Federal Reserve and other developed market central banks have shifted their gaze from growth to taming inflation, with tighter monetary policy and interest rate hikes playing out.

Thursday saw this fear turn a darker shade, after US consumer inflation touched a high of 7.5 percent, making a 40-year high. This sharp jump in consumer inflation has reset expectations for the US Fed’s rate hike trajectory, with a dramatic rise in the odds of a big-bang 50 basis point hike in its March meeting when it is expected to announce its first rate hike. James Bullard, president of the St. Louis Fed, told Bloomberg that he has become dramatically more hawkish. But my colleague Anubhav Sahu is less hawkish and believes there are factors that suggest we are not in a hyperinflationary environment that would necessitate such a sharp hike. Do read his take.

The US President is mopping the sweat on his forehead from the heat of inflation as it's being seen as a blot on his presidency. Today's FT selection (free to read for Pro subscribers) talks about its impact and how it may influence the White House's approach to tackling high inflation.

​Last night, US treasury yields shot up and the S&P 500 fell by 1.8 percent and the Nasdaq by 2.1 percent. Domestic equities are feeling the heat too, notwithstanding the cooing noises from the RBI yesterday, down by 1.5 percent at noon.

LIC's IPO will be testing the timing of an IPO hypothesis. It is widely expected to file its draft offer document as early as today with the market regulator. What we know is it’s going to be a whale of an issue, posing a question of how the market will absorb it. There’s a lot at stake for the government—both in terms of credibility and the issue’s importance for its FY22 divestment target.

Of course, the right stock at the right place will always find takers is another saying. Whether the stock is right will become known once its papers are filed but with investor sentiment hurt by market volatility, a lot depends on the investment bankers and the promoter agreeing upon the right price.

On a related note, Shishir Asthana writes on the IPO funding boom, analysing why Sebi and the RBI are taking steps to make the IPO allotment process fairer and tighten IPO funding. High net worth individuals will find it difficult to borrow huge sums to apply in IPOs, a main reason for the crazy oversubscription levels seen in some IPOs. RBI’s rules take effect from April 1, 2022, and the LIC issue may not get affected if it opens before that date.

Although Indian equities may be down, India is much better placed to withstand the risks of a US taper than it was after the 2008 global financial crisis. In ‘What to do when the market is going everywhere, but heading nowhere?’, Ananya Roy maps the differences between then and now and the options before investors but does note that since we are at the end of the easy money era, it’s time to temper expectations for equity market returns.

Investing insights from our research team

Weekly Tactical Pick – UTI Asset Management
Ujjivan SFB – Why it would remain a fair-weather friend
Zomato: Does correction create upside in this stock?
Page Industries: Multiple growth levers
Input prices, chip shortage weigh on M&M’s Q3
Radico Khaitan – Time to take a swig?
Hindalco Q3: Higher pricing of aluminium, copper helped; Novelis took a breather

What else are we reading?

Herd Immunity Tracker: Is the pandemic’s end-game round the corner?

UP polls — Party manifestos a challenge to economic rectitude

‘Jobs for locals’ is poor economics and unlikely to work

How Tata Power successfully sidelined its Mundra power plant

Algo Rhythm | The 3rd stage of algo trading

Assembly Elections | BJP is fighting multiple battles in Goa

And in, Personal Finance

Personal Finance: Time to rejig your portfolio in favour of defensive bets?

Technical Picks: Balaji Telefilms, JSW Energy, Indian Hotels and Apollo Hospitals (These are published every trading day before markets open and can be read on the app)
Ravi Ananthanarayanan

Moneycontrol Pro ​