Do it yourself

  Wishing all readers, a joyful holiday season and a happy new year. J. P. Morgan: Too early for a victory lap As we head into 2024, a combination of solid activity and falling inflation has seen the market narrative increasingly shift towards the prospects of a soft landing. •        We are a little more skeptical . Even though Western economies may be less rate-sensitive than in the past, we expect that the “long and variable lags” of monetary policy transmission are at least part of the better explanation for the economic resilience seen so far. •        We think  it's too early for the central banks to declare outright victory  over inflation, and anticipate that rate cuts in 2024 are unlikely to pre-empt economic weakness. •        We therefore think  interest rates could be set to fall later than the market currently expects,  but eventually they may also fall further...

  In my view, the stock market outlook in India, in the short term of one year, is a function of the following seven factors:  Macroeconomic environment  Global markets and flows  Technical positioning  Corporate earnings and valuations  Return profile and prospects for alternative assets like gold, real estate, fixed income etc.  Greed and fear equilibrium  Perception of the political establishment The outlook for these seven factors for the next twelve months is as follows, in my view— Macroeconomic environment – Neutral My outlook for the likely macroeconomic environment in 2024 is as follows: (a)        Inflation: Consumer inflation may average well within the RBI tolerance band of 4% to 6%. However, food inflation may continue to be erratic and cause occasional violations of the upper range. (b)        Fiscal Deficit: The fiscal situation of the cent...

The first day of January of the Gregorian calendar is widely celebrated as “New Year” globally. Scientifically speaking, this is just another point in ad infinitum ; and no different from the millions of other similar points in the history of mankind. Nonetheless, we celebrate it as a new beginning, after every twelve Gregorian calendar months. The idea perhaps is to take a break from the routine and reflect on events of the past twelve months to review, reassess, revise, retreat a bit if required, and resume. It is common for people to take a pledge on this occasion, to take corrective measures for improving their lifestyles and behavior, and to set new goals for themselves. In the financial markets also, it is a tradition to use this occasion to reflect on the market behavior during the past twelve months, outline the events to be watched over the next twelve months, and make an assessment about what may work best for investors and what may not. Following the tradition, I have al...

From the events of the past few years, it is evident that the era of peace and global cooperation, which started in the aftermath of two devastating wars in the first half of the twentieth century and flourished after the end of the Cold War in the late 1980s, may be coming to an end. In my view, the year 2024 will see a new paradigm unfolding in global economic, political, and geopolitical spheres. The new paradigm which would take a couple of decades to manifest fully, may  inter alia  see multiple axes and alliances emerging in the global order, competing with each other for supremacy. Consequently- ·           Global trade may get fragmented into multiple trade blocs. ·           A new monetary order may emerge that may include separate invoicing currencies for trades within different blocks and a couple of independent currencies for broader international trade. Unsustainable debt of ...

The 2023 rd year of the Christ is ending on a rather buoyant note for the Indian financial markets. The equity markets are at all-time high levels. Bond markets are now looking up, after challenging 18 months. Cryptocurrencies have yielded good returns. Gold has also been positive. Macroeconomic conditions have become supportive of the markets – prices are under control, currency stable, twin deficits under control, no overhang of government borrowing crowding out private capex, manufacturing growth is accelerating as capacity utilizations improve and PLI payments begin to flow in, and overall growth is the best amongst the global peer. The foreign flows have improved, while the overall domestic flows have remained strong. Corporate earnings remained buoyant led by easing raw material prices, improved domestic demand environment, deleveraged balance sheets, and materially improved asset quality for the lenders. Stock markets – Capex theme finally catches up The Benchmark Nifty50 h...