Moneycontrol Pro Panorama | Sticking the landing

India's future in space exploration hinges on Chandrayaan-3. (Image: ISRO)

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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. 
India’s moon mission Chandrayaan-3 has begun its countdown for take-off. Given that it has to cover a distance of 3.84 lakh kilometers, we would know only by August if the Indian Space Research Organisation (ISRO) will be third-time lucky in getting its explorer to stick the landing on the moon. The previous two missions Chandrayaan-1 and Chandrayaan-2 ended in failure—the first one crash landed and the second met the same fate owing to a software glitch.

If Chandrayaan-3 sticks its landing, it will likely evoke an exuberant response. Accolades and social media congratulatory posts would follow. While Indian investors too would share in the joy, for them a different form of landing is making them nervous—that of the US economy.

Indian and US equities are in good spirits after the latest round of inflation data and slowly receding concerns over a US Federal Reserve-engineered hard landing. Indeed, investors are now asking “Where is the recession?” as market veteran Ajay Bagga captures in this piece with the same title. Bagga says that analysts have turned the most anticipated recession in to the most postponed one. This also means that Fed rate cuts won’t be easy to come. The investment chief of one of the world’s top hedge funds, American investment firm Bridgewater Associates, Bob Prince has warned that the battle with inflation is far from over and that the Fed won’t be cutting rates as many still expect. In fact, rate hikes are not over yet as analysts at UBS point out. UBS is pricing in a rate hike at the Fed meet towards the end of this month and perhaps even more in later meetings.

Even as the guessing game continues on the severity of the US economic slowdown, foreign investors are more than happy to pour their monies into India. Valuations have reached levels that may soon become a point of discomfort but investors, both foreign and domestic, don’t seem to be perturbed yet.

Perhaps, it is time that investors took a more nuanced approach. One way certainly is to look at the Q1 earnings of companies with a toothcomb. Ananya Roy explains in her piece the segments to look at and what to expect from the various corners of India Inc here. Information technology, automobiles, and consumption firms may likely report lukewarm results, she argues. This expectation has been borne out with the Q1 results of TCS, Wipro and HCL Technologies that have been released so far. Even the opening batsman of bank earnings, Federal Bank, failed to enthuse investors and instead reported a contraction in net interest margins and pressure on profits.

Indian equities need two things to come true, for them to head for the moon, earnings must meet expectations and the US economy must engineer a soft landing. We may need Chandrayaan-3 to land safely for national pride but we need the US economy to do a safe landing to hit our investment stride.

A line said by Jim Moriarty, the villain in Arthur Conan Doyle’s Sherlock Holmes novel should resonate with investors today. “It's not the fall that kills you. Of all people, you should know that it's not the fall, it's never the fall. It's the landing!”

Investing insights from our research team

Wipro Q1 FY24 – Will the stock’s long underperformance reverse?

Weekly Tactical Pick: This mid-sized cement player has aggressive growth targets

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Technical Picks: Finolex Cables, REC, NMDC and HDFC Bank (These are published every trading day before markets open and can be read on the app).

Aparna IyerMoneycontrol Pro