Invest Without Emotions
Is the RBI going to surprise the market with a rate hike when it meets on July 30th? If past is prelude, then the RBI, having to deal with a lame-duck government, might just pull the trigger on this one. Consider what it did during the Asian currency crisis back in 1997/98 (courtesy Barclays):
If FII inflows don’t hold up, then they might just do this. Interesting times…
The Nifty clocked in a modest +0.34% rise this week, largely driven by FMCG.
| GODREJCP | +11.88% |
| GSKCONS | +13.49% |
| HINDUNILVR | +14.05% |
| ASHOKLEY | -14.61% |
| YESBANK | -13.43% |
| INDUSINDBK | -11.50% |
| GOLDBEES | +0.65% |
| NIFTYBEES | +0.50% |
| JUNIORBEES | +0.22% |
| INFRABEES | -1.00% |
| PSUBNKBEES | -5.14% |
| BANKBEES | -5.42% |
The A/D line continued on its downward trajectory…
The yield curve inverted…
And the market went all defense…
Mr. Bernanke, Fed Chairman: Nobody really understands gold prices and I don’t pretend to understand them either.
Note from JP Morgan:
Over the past 18 months, we have cut our 2013 EM growth forecast from 6% to 4½%. We continue to see downside risk with activity data tracking below our Q2 projections and no evidence of policies to reverse this slowdown. A number of EMs have inflation pressures and weaker currencies that require tighter monetary policies while wage pressures have eroded profit margins and thus corporate expansion. This slowdown has momentum. At some point, the EM slowdown could drag DM along.
The EM equities have performed the worst:
And FII’s have been evacuating the bond markets:
Credit Suisse: In India, foreign investors’ fixed income holdings fell sharply in June and continue to fall in July. We expect selling to subside and buying to resume in 3Q 2013.
Barclays remains bullish on the Rupee: While near-term depreciation risks remain, the INR has fallen significantly since early May, and in this context we expect the currency to appreciate against the USD over the coming year. We believe this will be driven by a narrower current account deficit and policy initiatives that can meaningfully ease funding concerns (ie, NRI bond issuance), as well as RBI rate cuts facilitated by relatively subdued inflation pressures. Despite the limited potential downside to USD/INR near term, the rupee is now 15% undervalued versus the USD, according to our estimates.
Investors will do well to remember this titbit: When John Pierpont Morgan was asked what the stock market will do, he said “It will fluctuate.”
The Nifty surged 2.40% this week, driven largely by Infosys and the IT sector in general.
| NIFTYBEES | +2.33% |
| BANKBEES | +2.03% |
| JUNIORBEES | +1.70% |
| GOLDBEES | +1.32% |
| INFRABEES | -0.34% |
| PSUBNKBEES | -0.85% |
Did short-term rates actually go up?
IT up, Autos down.
If there is schlepping involved, it is more likely to be real work. If there are sexy elements involved, it is more likely to be conspicuous production pretending to be work. Sexy work is easy to enjoy, learn, value and integrate into your identity, primarily because it is downhill psychological work: it is the cognitive equivalent of muscular atrophy. Schlep work is harder to enjoy, learn, value and integrate into your identity, primarily because it is uphill psychological work for a social species.
Source: You Are Not an Artisan
Credit Suisse published a report – Gold: The Beginning of the End of an Era – back in February. The basic thesis was that the peak of the fear trade has now passed and that against any sensible benchmark gold still appears significantly overvalued relative to the long run historical experience. Its important to keep the bigger picture in mind before you rush to buy the dips.
Here are some charts from the same report.
TL;DR: gold is expensive, has broken its uptrend and is a poor inflation hedge (in terms of USD).
[stockquote]GOLDBEES[/stockquote]
