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Moneycontrol Pro Panorama | Rate hike looming, heat is on retail investors

In today’s edition of Moneycontrol Pro Panorama: A midcap in spotlight, warning for stock market, Modi’s three Ts in Tokyo, Start-Up Street and more

May 26, 2022 / 06:26 PM IST
The hope is that sharp interest rate hikes will help cool off commodity prices, but not go far enough to hugely dent demand.

The hope is that sharp interest rate hikes will help cool off commodity prices, but not go far enough to hugely dent demand.


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Clearly, the road ahead for retail investors is one of uncertainty as signals from all market indicators are mixed. Food prices are skyrocketing. Inflation is still high, but government measures such as cutting excise on fuel and curbing exports in some commodities bring the hope of prices cooling off. Demand is perking up after the pandemic, but manufacturers are stumbling over supply chain bottlenecks.

Forex markets are volatile, so are equity indices. Cues from institutional investors are mixed—foreign institutional investors are heavy sellers in Indian equities while domestic institutional investors are net buyers over the past few months.

It’s been a mixed bag on corporate fundamentals too as portrayed by the recent March quarter earnings. A report by ICICI Securities sprinkles some optimism, stating that on a 12-month basis (trailing twelve months) aggregate corporate profits of the top 1,000 companies by market cap has expanded. Interestingly, industrials account for almost half the share of the profit pool, the highest in a decade. But the share of services, consumption and healthcare has dropped to a two-decade low of 27 per cent.

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Adding to this uncertainty are dark clouds of global geopolitical risks, sanctions arising from the Russia-Ukraine war, the US Federal Reserve’s resolve to accelerate rate hikes and the high probability of a rate hike from the Reserve Bank of India when the monetary policy committee meets in early June.

The silver lining, however, is the expectation of strong economic growth despite these headwinds. The International Monetary Fund has projected that India’s gross domestic product will grow at 8.2 per cent in 2022. This makes it the fastest-growing major economy in the world, almost twice faster than China’s 4.4 per cent. (Incidentally, the Modi government completes eight years today. Read Manas Chakravarty’s piece on the government’s performance so far.)

Yet, this does not rule out profit contraction in companies for a couple of quarters. The hope is that sharp interest rate hikes will help cool off commodity prices, but not go far enough to hugely dent demand. For now, the outcome of rate hikes, both globally and in India, is hazy and will keep policymakers, industry and analysts on the edge. Retail investors can only brace for a rollercoaster ride ahead.

Investing insights from our research team

Why this mid-cap with strong fundamentals, undemanding valuation deserves a look

Aditya Birla Fashion and Retail: On track for rapid growth

Dr Copper is giving a big warning signal to equity markets!

Power Grid Corporation of India: Growth at a critical juncture, dividend to support stock

What else are we reading?

Modi Govt @ 8 | Opposition's tale of missed opportunities

The real reason for the Quad

Modi’s three Ts in Tokyo — Can New Delhi fit its needs to a T?

Sugar export cap raises policy red flag for sugar mills

Downtrend, recession fears and the quest for a market bottom

Start-Up Street: The changing face of social VCs

There is still a large under-recovery of cost increases: Sanjeev Aggarwal, CFO of JK Tyre

Now is the time for stockpickers in markets (republished from the FT)

Technical Picks: Narayan HrudayalaDLFWiproGold miniGAIL and USD-INR (These are published every trading day before markets open and can be read on the app)

Vatsala KamatMoneycontrol Pro
Vatsala Kamat
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