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- It was a complete carnage in US when the markets had opened y’day. Dow was down 700 pts at opening and there was bloodbath elsewhere as if stagflation has already arrived but then good sense prevailed and it was IT stocks that pulled the wall street by half. Google was the key contributor
- People were worried that the cocktail of high inflation and low growth will push the FOMC to do something unexpected and having looked at the side instruments especially yields and dollar index my take was there is no chance rate cut will be deferred
- Dr. Subba Rao’s book ‘Who moved my interest rates’ is a perfect pick to understand how the RBI works and there is one point that he’s raked up to debate – how far it is wise to follow one dimensional monetary policy aimed at inflation targeting and let the growth suffer. I think the American outcome is a perfect example of that
- Citi has clearly endorsed what my view was in y’day write up stating that Fed may come out with first cut as early as July and this is significant especially given that the Personal Consumption Expenditure numbers have not come in that firm to defer a rate cut. Even now no one is talking about a June rate cut but of course December speculation is also not holding that firm
- There is a recovery in Dow as the index is trading at a gain of 160 pts as Nasdaq is trading at a gain of 320 pts and S&P also gained 55 pts as the index trades above 5100. Looks like the indices are going to close in green over the weekend
- There is hardly any movement in Gold, up 4 dollars or ten year US treasuries at 4.67% but dollar index had a run as it moved from 105.45 to 105.90; I don’t think there is too much to read into the movements of market as these are normal trading moves for the time being
- Coming to India – nifty had an overnight overhang and opened in red continuing to remain so right through the day and gradually going down to end at a day’s low of 150 pts. Was it the hangover of US or is it that at 22500 market is more in the toppish zone, my own sense is aligned to market that it’s latter as twice earlier it has turned back from there, especially being in midst of elections this is bound to happen
- In the weekly auction of g-sec Government of India borrowed INR 320.00 bn through issuance of 10y and 49y paper at a cut off of 7.19% and 7.33% and as I’ve been saying it’s time to continue to go long in borrowing and with due respect government should give up its obsession of borrowing short. Once you stop borrowing short, the need for rollover of maturities will diminish automatically
- As per weekly statistical supplement – the Fx reserves stand at USD 640.00 bn, the aggregate deposits at cusp of INR 210.00 trln though still growing at 13.8% only and systemic credit at INR 166.00 trln and growing at 19.9%
- Credit still outpacing deposit growth, inflation a bit away from 4% though approaching that level and INR / USD exchange rate now showing its colors. In such a scenario asking for rate cut, isn’t it too much. But as I said earlier as well, govies are decoupled from these fundamentals for some other reasons so there is a chance that around 7.20 – 7.25% band on old 10y i.e. 7.20% on new 10y may be toppish
- Closing remarks – off the cuff – weekend promotion of my two books – ‘When Life Shortchanged Me‘ talks about what happens to stocks when the market falls – “Every stock has an embedded value and as long as the company is a going concern the stock can never be zero; so if a stock goes through a bad run and you fail to prune down exposure in beginning don’t sell it at a price where you may actually be buying it, I mean dumping is not advisable as the stock will manage to comeback someday. Especially if it’s a frontline counter you don’t need to worry at all
- The other book – ‘Rewards of a Shortchanged Life‘ – has a central character a lawyer turned finance minister, the man who’s keen cricketer, a left arm bowler and a right hand batsman who’s got the habit of usually forgetting his wallet at home. Not only that the person may be the go to man for all crisis situation in financial set up and people have often asked me if I’ve taken some inspiration from Nana Patekar’s character in Welcome to carve out that character and I firmly say no, though there may be some similarities out of coincidence which might have come in inadvertently
- Somewhere what’s happening in market for last three days and the way a single scrip is being beaten down as if an unpardonable offence has taken place. It may not be more than a procedural lapse and taken place unintentionally. Share of the man’s company being beaten down black and blue I can simply say both my books are playing out – whoever wants to read what I’m trying to convey can go on amazon and read the e-book edition and crack the cryptic code
Stay safe, stay healthy, God bless you all, have a great day !!
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Ebook edition of my books Rewards of a Shortchanged Life and When Life shortchanged Me is given below. Kindle subscribers can read it for free. Follow the link
Vikas Miglani writes 