Do it yourself

The quarterly result season has started on an encouraging note with IT Services major TCS announcing mostly inline 4QFY22 and FY22 numbers. Although I do not assign much importance to the quarterly results in the context of my investment strategy, I shall be watching this season very closely, for three reasons: (i)    The management commentary for FY23 would be important to understand the impact of global growth, inflation and geopolitical conditions on Indian businesses. BY now most of the corporate management would have assessed the impact on their respective businesses and their assessment would be reflected in their guidance for FY23. (ii)   The present earnings estimates of analysts for FY23-FY24 may not be factoring the latest developments, especially with regard to monetary policy, inflation, and demand outlook. Since the previous result season most agencies have downgraded India’s growth forecast; increased inflation (wage of raw material cost inflat...

In past couple of weeks, some news items, and market & economic trends have attracted my attention. All these news items & trends somehow reflect on the reflation trade that has dominated the global markets for past few months. The rise in commodity prices in past one year is seen mostly a function of a combination of demand and supply side factors. Post global financial crisis (GFC 2008) the investment in new capacities had slowed down considerably. The economic lockdown due to outbreak of pandemic further curtailed the supply of many industrial commodities. The logjam at Suez Canal further impacted the supply chain. The supply of commodities obviously could not match the recovery in economic activity as the economies began to open up. The trillions of dollars in pandemic related stimulus further boosted the demand, as all three activities, viz., consumption, capex and trading got boost from worldwide stimulus. The US government’s plan to invest US$1trn in building nation’...

 The strong rally in global metal prices, and consequently metal producers, appear to be faltering. Chinese authorities have taken a number of measures to calm down the steel and iron ore market. Iron futures have fallen sharply in past couple of weeks. Besides, steel and base metals like copper and aluminium have also corrected sharply from their recent high levels. A few brokerages who were extremely bullish on metals from midterm viewpoint have also turned little cautious. For example, in a recent research note JM Financial stated that “ The recent spike in the headline inflation in several countries, including in the US, has been led by steep rise in global commodity prices, including metals, soft commodities and crude oil prices….”. “For us the rally over the past 12 months was fairly predictable. But things are not as clear looking forward. We believe that market indicators have run far ahead given the context of the underlying strength of the economic recovery that is...

 “Commodities” is the most important buzzword in equity markets these days. Chartists, analysts, economists, strategists and traders et. al. are predominantly talking about stocks of commodity companies. The strong rally in the stocks of commodity producers is primarily based on the material rise in the global commodities’ prices, especially in past one year. I analysed the market performance since announcement of first lockdown (25 h March 2020). I also looked at the market performance in three other timeframes, viz., (i)     Since January 2021, because most of the restrictions announced in March 2021 were lifted, US elections were completed and vaccine launches had already begun. (ii)    Since February 2021, because a market exciting budget was presented with strong on infra building and fiscal discipline; and UK exit from EU was complete, and global trade had started to normalize. (iii)   Since April 2021, when a second wave of pandemic sta...