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- One more reason on the table that takes the respect for the institution to next level और कह सकते हैं – मुरीद हो गये हम दास साब के – I mean the present RBI Governor had taken over after two market legends and there was an element of skepticism on the possible actions of RBI
- Hats off to Governor Das he’s pursued the same RBI agenda that Governor after Governor have been following and ensured that the autonomy of the institution is not compromised and the mandate to maintain the order is duly fulfilled
- Lot many voices had started gaining momentum that the cut in India is round the corner but when the MPC minutes were released y’day the entire expectation had been watered down. One should read the same as a very hawkish one and in a way that should change the narrative for bond market albeit in the short run
- There is no scope for a change in stance and there is a need to avoid adventurism. It is premature to even talk of change in stance even though the food inflation is showing signs of easing. He’s given a guidance for FY 25 it seems as it’s clearly stated that there may not be a cut even till early part of 2025
- The argument given is logical that the resilient growth is one of the reasons that there isn’t a need for cut at the moment, had growth been a constraint a cut could have been contemplated. Prof. Jayant Verma had a different argument though but majority prevailed. Dr Ashima Goyal also had a vote for cut and now best to expect is some sort of tone softening in monetary policy meetings post the monsoon season
- Surprisingly the g-sec market remained flat with new 10y closing at 6.97%. If not y’day then on Monday some reaction can be seen and felt in the market. The Gilts at this point in time are rejoicing under the JP Morgan bond index inclusion and that has also come in as a big boost to markets
- With the inclusion effective June 28 market expects an incremental flow of USD 25 bn in Indian Govies and before the announcement itself, it seems USD 10 bn have already been invested. May be this is one of the reasons due to which despite a hawkish tone the yields may not go in for a big rise
- INR / USD exchange rate in the meanwhile has hit a record low of 83.62 but I don’t think there is any surprise around that. It’s almost been a year since the rupee is hovering in that 82 – 83.50 band and somewhere it had to break out. Looks like now it has. More surprisingly this time during elections also there wasn’t too much of volatility
- The day wasn’t a surprise only for debt, even on equity there were wide swings in view of some index adjustments and a 100 pt shift on nifty either side within a few minutes was not a one off move, it happened more than three to four times and in the end nifty ended lower by 65 pts and bank nifty was down 120 pts
- Somewhere the equity market is not as simple as it is looking to be at this point in time and there are elements of worry. Banking stocks are first one to react and despite bank nifty managing to reach cusp of 52k is now showing signs of fatigue and Monday opening will be crucial
- Since banks tend to frontend the entire market, a slight pressure can actually act as a long awaited trigger where a correction, I am not quantifying mild or deep, may set in and stocks may find the real value that they should be traded at
- On my part I’ve tried to play the role of a pressure cooker which has a safety valve just to ensure that a balance is maintained in our investment approach and that’s the reason I keep cautioning against any unforeseen scenario
- My mentor had told me in 1999 to develop the habit of following a business channel and for a very long period in time my bed tea was accompanied with TV remote to switch CNBC. Off late I had given up the habit given the dilution in content taking it a bit towards political / masala stuff. After a long time I switched it on y’day and realized I had been missing something big
- Pankaj Tibrewal is a Kolkata based fund manager whom I don’t know personally. Maybe in some of the group we may turn out to be common connect as well and I heard him on CNBC y’day. One can figure out that he’s not seeming bearish on market but in a way cautioning not to get carried away as mistakes are made at top of the market
- He’s highlighted the profit contribution to market cap differential, the earning growth etc. While in the conversation he’s highlighted some positive take aways as well but as I say I took this one piece of advice and sharing herewith readers as to an extent I’m in sync with what he’s said. Preservation of capital over next 12-18 months is critical
- Internationally the markets are moving sideways so I’m giving them the bye today and there are no closing remarks also over the weekend. Just have a happy weekend, relaxed and fulfilling
Stay safe, stay healthy, God bless you all, have a great day !!
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Vikas Miglani writes 