AKG weekly charts - Issue #94
This newsletter is a weekly selection of 10 charts hand-picked across the internet which pertains to our investment strategy and bring an updated insight and perspective.
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Summary of last week in financial markets here
[1] During FOMC press conference last week (see thread here on Fed decision), Powell said: Fed officials 'just don't' see rate cuts this year’.
Well, markets think otherwise and pricing in 4 rate cuts by 2023-end. Will market force the hands of Fed through a crisis?
[2] MNCs expected to expand their base in India in the coming years (China+1?) across Warehouses, FMCG, EVs and semiconductors sectors. PLI scheme will add to the capex thrust. Theme of the decade to invest in India! [Source : Morgan Stanley]
[3] China’s capital Beijing reported 43,000 fewer residents in 2022 compared to 2021 as deaths outnumbered births. The change is not particularly significant on its own, but does represent a worrying trend amid China’s broader demographic crisis. The country’s aging population and plummeting fertility does not bode well for China’s and world’s growth. [Thoughts on ageing population in an earlier post here]
[4] The regional banks are responsible for 80% of commercial real estate lending in the US, 50% of consumer lending, and 40% of business loans. So if deposits keep running from them and going to the big banks, this is going to be an immediate credit crunch on the US economy, since the big banks cannot fill that void immediately. Next 30-60 days crucial to track!
[5] Top 4 IT companies (including unlisted Cognizant) have 19-29% revenues coming from BFS segment. LTIMindtree has 37% in BFSI. Mphasis has 62%.
With bank crisis in US (the collapased and under duress banks are clients), the new business in H1FY24 seems tough. Time to price in lower growth for the IT sector in near-term?
[6] The market risk premium reflects the additional return required by investors in excess of the risk-free rate. We are finally getting into a “comfort zone” where increase in ERP can be 2.0-3.5% higher in the coming quarters.
Bad prices and Bad news won’t stay together for long. Time to scale up or build fresh positions is in next few weeks!
[7] In all the turbulence and mayhem of last decade, Indian economy and markets have held up strong and steady. The benchmark Nifty50 yielded an 11.3% CAGR in local currency over the past 10yrs. Even in USD terms, it yielded a decent 7.7% CAGR, much better than Chinese, Japanese, and European equities. USDINR depreciated at a CAGR of 3.4% over the past decade, making it one of the most stable currencies amongst larger emerging economies. [Source : Investrekk]
[8] According to the latest survey, major fund managers are showing a decrease in risk-taking in response to instability in the international banking system. It showed that the perception of credit default and counterparty risk deteriorated the most last month, and the combined risk perception reached its highest since May 2020, indicating that global markets remain wary of further banking turmoil.
Words like Contagion, Backstop, credit crunch likely to dominate the headlines. If all goes well and is contained, look for that one final panic move in the coming weeks to go all in!
[9] It’s been a strange quarter (Q1CY2023) so far with high beta assets like Bitcoin and FAANG stocks have made a strong comeback in terms of YTD changes while high growth EMs have struggled despite falling Crude and Dollar index.
[10] Historically, Most new bull markets are preceded by de-risking and valuation resets. In the current cycle, we are seeing trends in these directions. But panic and despair missing, atleast in Indian equity market context. Give me some of it and will go in full steam ahead!
Disclaimer:
This newsletter is for information purposes only. In this material, Amit Kumar Gupta (SEBI registered Research Analyst, INH100009327) has used information that is publicly available and is believed to be from reliable sources. While utmost care has been exercised, the author does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Readers, before acting on any information herein should make their own investigation & seek appropriate professional advice. Any sector(s)/ stock(s)/ issuer(s) mentioned do not constitute any recommendation and the RA may or may not have any future position in these. All opinions/ figures/ charts/ graphs are as on date of publishing (or as at mentioned date) and are subject to change without notice. Any logos used may be trademarks™ or registered® trademarks of their respective holders, our usage does not imply any affiliation with or endorsement by them. Past performance may or may not be sustained in the future and should not be used as a basis for comparison to infer any investment ideas.