Do it yourself

This is further to “No clouds on the horizon” posted last week. I made a rudimentary assessment of the potential impact on the financial market, assuming the monsoon rains are inadequate and/or prolonged heat wave conditions persist over a large part of north and central India, as anticipated by the weather experts. In my view, investment strategy needs a tweak to make it ready for a hotter and drier summer. Asset allocation An inadequate monsoon would essentially mean (i) persisting higher food inflation; (ii) higher fiscal support to the rural sector; (iii) high food credit demand; and (iv) higher short term yields. Raise some tactical cash I shall therefore like to raise some tactical cash from my equity allocation and deploy it in short term or liquid funds. I however do not see any case for changing the strategic allocation at this point in time. A sharper than presently anticipated correction in equity prices will motivate me to increase my equity allocation to “overwe...

  In a press release issued last week, the Indian Meteorological Department (IMD) cautioned that during the upcoming hot weather season (March to May (MAM), above normal maximum temperatures are likely over most parts of northeast India, east and central India and some parts of north west India. Normal to below normal maximum temperatures are most likely over remaining parts of the country. IMD forecasts show an enhanced probability for the occurrence of heat wave over many regions of northwest and central India. As per the latest forecast of IMD, the currently prevailing La Nina conditions are likely to weaken and turn into a o El Nino Southern Oscillation (ENSO) neutral condition during the pre-monsoon season. It is pertinent to note that La Nina conditions are known to cause normal to above normal rains in India, while El Nino conditions are known to cause rain deficiency in India. Neutral ENSO conditions help a normal ( + 10% of long term average) monsoon. In India La Nin...

In the past one year, inflation has been one of the primary concerns for most countries across the globe. Rising prices of food and energy in particular have materially impacted the lives of common people on all continents. The central bankers of most major economies have hiked policy rates in the past one year to control inflation. In the current year 2023 so far, 13 major central bankers have taken policy action(s) and all of these actions have been hike in policy rates. However, in recent weeks inflation has shown some tendency of cooling down. It is difficult to assess how much of this cooling down is due to tighter monetary conditions; and how much could be attributed to other factors like restoration of supply chains that were broken during the pandemic and warmer winters resulting in lower energy demand in the northern hemisphere, etc. Nonetheless, some central bankers have adjusted the pace of tightening to smaller hikes. Most of them, though remain...

  The benchmark indices in India are now trading at their highest ever levels. In fact, in the past one year, India (+9.6%) has been one of the best performing equity markets in the world, in line with the emerging market peers like Brazil (+8%), Russia (+9%), and Indonesia (+7.5%) etc. Only a few emerging markets like Venezuela (+107%), Argentina (108%), and Egypt (+15%) have done much better. For many Indian investors these statistics could be meaningless. To some it may actually be annoying as the performance of their individual portfolio may not be reflecting the benchmark performance. Regardless, largely the equity market returns have been reasonable, considering the challenging environment. It is therefore a moment to celebrate. Once the celebrations are over, it would be appropriate to ask ourselves “whether at ~18700, Nifty is adequately taking into account all the factors that may impact the corporate performance, risk appetite, liquidity and financial stability in 202...

In past couple of months a number of research reports have expressed concerns over the rural demand in the wake intense second wave of pandemic and subsequent lockdown of economic activities. Some consumer facing corporates have also expressed similar sentiment in their interaction with analysts and investors. The popular views seems to be that unlike last summer, when the rural demand remained resilient despite a wider and stringent lockdown, this year the demand may not show similar resilience. Wider and deeper spread of infection this time is one of the primary reasons behind these concerns. Rising stress in household and unorganized sector is also expected the discretionary spending in check. In this context, there are few points that need to be noted by investors before forming a negative view on consumption theme. Record production in crop year 2020-2021 Firstly, as per the third advance estimates for the 2020-2021 crop year, the agriculture ministry has expected record foo...