Moneycontrol Pro Panorama | Stocks ride high, but signs of slowing economy persist

Representative image

Representative image

Dear Reader, 

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. 

The mood on the Street suddenly turned ebullient as the BSE Sensex breached the 62,000 mark and the Nifty hit a 52-week high. Inflation data across economies seem to suggest that central banks may turn less aggressive on rate hikes, with the US Federal Reserve leading the way in pivoting soon.

As always, the question before investors is: Will the rally continue? Expectedly, there has been some profit taking in front-line stocks and the benchmarks have let off some steam.

Indeed, domestic inflation is cooling off, so are commodity and crude prices. GST collections and e-way bills are improving, showing encouraging movement of goods across the length and breadth of the country.

But there are tell-tale signs of the economy slowing. October trade data warn of an elevated trade deficit as exports declined for the first time in two years and imports too moderated to the lowest in eight months. Note that 24 of the 30 key export items showed contraction echoing economists’ concerns on how far domestic resilience can hold out amid the global slowdown. Today’s Chart of the Day shows India’s core exports have been falling since July this year, but the performance in October was particularly bad.

India Inc’s performance in the September quarter reflected the adverse impact of high input and energy costs on profitability, in spite of revenue increasing. One must be cautious in observing whether the revenue increase was a function of sales volume expansion or inflation. The former is needed to sustain margin improvement and earnings expansion. That, in turn, must be robust enough to justify valuations.

It is known that Indian equity valuations, at this juncture, are at a premium to other emerging markets and also to near-term averages. But this could change, too. The Bank of America survey of Asia Pacific fund managers sees policy reversals in China, which is fuelling a jump in Chinese equities. This rotation into China has come at the expense of India, points out Manas Chakravarty in this article, analysing the survey data.

It is one thing to debate over Indian markets decoupling from the rest, but it is another to believe that our economy is completely insulated from the rest of world’s policy decisions, inflation numbers, rate hikes demand and supply equations. In this context, this FT piece (available only for MC Pro subscribers) on the need for central banks, especially the US Federal Reserve, to ensure price stability over everything else, offers interesting insights.

Investing insights from our research team

Vesuvius India: Capacity expansion to drive earnings in the medium term

Concor – Q2 results underscore strong business moat

Berger Paints: Gain in market share a bright spot

Info Edge: Does surprise margin improvement make the stock a good catch?

Page Industries: Results lag estimates, earnings growth outlook healthy

Repco Home Finance: Strong recovery, momentum to continue

What else are we reading?

Nykaa’s bonus issue leaves a bad taste

RBI report highlights the glaring gaps in municipal financing in India

Rewiring power transmission — insulate it properly

Q2 results show Indian healthcare sector firmly on recovery path

Recommending governance changes in the shadow of NSE scam

Xi-Biden meet: stepping back from the brink

US Midterm Election Results: Reading the underlying numbers

Nepal Elections | Poll outcome of immense significance for India

Technical Picks: Muthoot FinanceGujarat GasDalmia Bharat and NTPC (These are published every trading day before markets open and can be read on the app).

Vatsala Kamat?Moneycontrol Pro