Moneycontrol Pro Panorama | Markets hit the sweet spot

The S&P Global India Manufacturing PMI came in at a 57.8 in June, continuing the healthy trend seen in earlier months.

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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. 

The Street already had its ears to the ground in June, listening to macro murmurings, as evidenced by the uptrend in equities. The S&P Global India Manufacturing PMI came in at a healthy 57.8 in June, continuing the healthy trend seen in earlier months. While the absolute level may be a bit lower than in May, this analysis in today’s edition explains why it’s still very healthy. Moreover, producers have been able to hike output prices despite input inflation being contained. That’s the pricing power investors like their portfolio's companies to possess.

The icing on the cake is that India’s manufacturing sector is the best in Asia, aided by the strength of its domestic economy driving its outperformance, compared to the export-oriented East Asian economies. China’s PMI data slid in June relative to May and at 50.5 is barely inches away from slipping into contractionary territory. While its weakness is good news for commodity importers such as India, it’s also not good news for producers of metals such as zinc, we point out in today’s Chart of the Day.

However, India’s PMI data represents the bigger firms that dot the economy. The K-shaped recovery’s continuing presence is confirmed by an increase in demand for MNREGA work. What questions does that raise about the prospects for a recovery in rural consumption? Read to know more. Even auto sales point to an uneven growth path for the sector. Which segments are doing better? Read here.

The biggest draw that India holds for foreign investors appears to be the relative strength of emerging markets compared to developed ones and within emerging markets, India too appears to be in good shape. In today’s FT selection (free to read for subscribers), Ruchir Sharma points to how among the 25 largest economies, three-fourths have beaten growth forecasts this year and countries such as India and Brazil have done so by a wide margin. He makes a case for the group as a tale of “economic resilience”. If foreign flows to India are any indication, that view has several takers.

Even so, here’s a counterview on the risks of assuming a hyper-Goldilocks scenario as a given. Acting on these risks means wondering if it’s time to let go of some opportunities now to wait for better ones later. If you are also thinking on these lines, then be sure to read this FT column: Cash is no longer trash for investors.

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Technical Picks: Canfin Homes, Tech Mahindra, Escorts Kubota, Coriander,Apollo Hospitals and USD-INR (These are published every trading day before markets open and can be read on the app).

Ravi Ananthanarayanan
Moneycontrol Pro