Monetary policy tightening

The Reserve Bank of India (RBI) headquarters, center, in Mumbai, India, on Saturday, Feb. 5, 2022. Investment activity is thus expected to strengthen, driven by rising capacity utilisation, government’s capex push and deleveraged corporate balance sheets. Manish Banthia The monetary policy for the last two years was largely crisis management given the pandemic times. However, post 2021, as growth started to recover, it was required for the Reserve Bank of India to normalize interest rates. Given that fiscal support in India was not as large in comparison to the US, the recovery seen in India was gradual. With the crisis behind us now, it is imperative we move to a more neutral stance in terms of... … [Read more...] about RBI will take interest rates to a neutral zone and stop there

(Representative image: Reuters) Dear Reader, A whiff of change wafted through the markets this week. The focus shifted from worrying over inflation to concerns about growth. The advance Purchasing Managers Indices (PMIs) for the current month for the US and the Eurozone showed slowing growth, but while they indicated inflation was cooling in the US, it continued to rise relentlessly in the Eurozone. They also reflected stalling demand and falling business confidence. The New York Fed’s economic model predicted an 80 percent chance of a hard landing for the US. UK consumer confidence hit a record low. In China, housing starts and property transactions reached extreme lows. The worries over an imminent recession in the US, the UK and the Eurozone sent commodity prices sharply lower. Copper prices have moved down dramatically. My colleague Ravi Ananthanarayanan wrote about the dark clouds hovering over steel . Crude oil prices too fell. That dissipated some of the … [Read more...] about MC Pro Weekender | A new narrative

The rise in profits/GDP ratio may provide the incentive for a revival of capex growth in the private corporate sector The ratio of corporate profits of the companies that make up the Nifty 500 to GDP is at its highest level since FY2012. The accompanying chart, sourced from Motilal Oswal research, shows the trend. There is, however, one big difference between the peak of corporate profits/ GDP in FY 2008 and in FY 2022. In FY 2008, when the corporate profits/GDP of the Nifty 500 surged to 5.1 percent, the public sector contributed 2.1 percentage points. In 2022, the public... … [Read more...] about The decade high profits-GDP ratio in 2022 has been powered by the private sector

Share to Twitter Share to Linkedin Stocks continued their descent last week, with the S&P 500 now well into bear market territory at -23% from the high. While most define bear markets as a decline of 20% from the high, some pullbacks just kiss that level or don’t result in widespread carnage across all sectors. What we saw last week certainly qualifies the current situation as a “real” bear market. First, the S&P 500 was down almost 11% during the previous two weeks. Secondly, all sectors participated in the sell-off. Whether it is “profit-taking” or “selling what you can rather than what you want to,” this indiscriminate liquidation is the hallmark of a bear market. For example, energy stocks, which had been almost impervious to the market weakness this year, declined 17% last week! That still leaves energy up 31% and the only sector in the green year-to-date. Utilities, which were only slightly lower before last week, underperformed the market over … [Read more...] about Welcome To The Real Bear Market