#Migmorning – October 7, 2022 – Vikas Miglani writes

Caveat – Views are personal and only for knowledge sharing. No commercial interest involved in bringing this on wordpress platform. Only idea is to consolidate daily content on one platform and no liability on part of mig if these inputs are applied for making investment decisions without carrying out your own due diligence

Internationally everything is right now linked to interest rates and Fed is clear, don’t expect an immediate relief
Though the jobless claims have gone up a bit as per latest data but Niel Kashkari has clearly stated that Fed is on course to raise rates as per the plan nipping the expectation of a slowdown or pause in hike
Best case scenario market can expect is softening of tone from Fed officials. Realising that the hikes are still not off the table, the yields rebounded and 10 y was at 3.83%. At 3.79% on 30y the inversin is is marginal and looks like actually 30y has peaked out. The 2y at 4.27% is still trading at 45 bps inverse spread to 10y
Rates are driving the dollar index as well. In view of the recent developments in UK and a recovery in Sterling and JPY the DXY had retraced back to 110.25 but it staged a pullback to trade above 112 overnight
Even commodities are meeting the same fate as Gold is once again retracing back to USD 1715 after having touched a recent high of USD 1750. Crude however is still holding on close to USD 95 and cut in production by OPEC is one of the factors
Wall street however ended in red overnight but after a stupendous run gaining over 4% in two trading sessions some technical pull back should be acceptable. Dow ended 350 pts lower, while S&P lost 40 pts and Nasdaq was down 75 pts
Given the strong momentum in international equities on Monday and Tuesday, Indian markets were expected to have a gap up opening and it played out as markets opened with a gain of over 100 pts on nifty
At day’s high the market was up over 150 pts however towards the second half market lost momentum and could manage to close higher by only 57 pts, though the A/D ratio was 3:1
Given the overnight international market movement and first mandatory fund settlement (on first Friday of month) expect the volumes to be a bit subdued and it won’t be a surprise if the markets sees a gap down opening and end the day in red
It was a day of sell off for govies as the 10y closed at 7.45%. Reason being attributed to the fall in prices is deferral of India’s inclusion in global bond index. Is it the real reason? Let’s believe it for believing it
At least 50 – 60 bps hike is still on table from RBI and reason for that is not the local factors but external factors. India may have managed to contain borrowing but the credit off take is at a multi year high. This is enough reason for yields to remain elevated but at shorter end
A question on deposits – is the time right for extending the tenor of deposits now. I mean should one go for one year or a three year deposit. We are slightly off from the peak on deposit rates and looks like the time is ripe to start elongating the tenor gradually as at the current rates, sans taxation element, deposit rates may marginally beat inflation
If you are an equity fan however and willing to put all your eggs in one basket – even after a 150 bps hike in deposit rates you will not like fixed deposits. I am not yet a retired senior citizen and that’s why find myself in this league to be termed as a punter. Given that I’m always young at heart, don’t know if I will ever get a chance to be a senior citizen and get to see FDs in my book other than the compulsive FDs required for some specific purpose. [View on FDs and equities is an idea only purely as a market participant, neither a recommendation to create an FD or go for pure equity. Assess your own requirement before making a decision]