I welcome you all to this week’s top news regarding Investment, Economy & Personal Finance.
Improvement in Public & Corporate Credit:
According to analysts, the banking industry might see a 10% credit expansion in FY23 as a result of increased economic activity, increased government investment in infrastructure, and a rebound in retail demand. All of these things could help businesses do better in the next fiscal year: Capex revival, more exports, rising commodity prices, and more working capital needs because more output could all help.
Bank loan growth in the corporate market is expected to be around 8% in FY23. Large commercial banks are expected to keep growing their market share, while public sector banks will have to be careful with their assets because they have more small and medium-sized business loans.
Metaverse in Gaming:
According to a Credit Suisse analysis, the metaverse is expected to increase data consumption by up to 20 times over the next decade. According to the analysis, the metaverse has huge potential to significantly increase screen time and bandwidth use.
Additionally, it adds that telecom companies Bharti Airtel and Reliance Jio are well-positioned to gain from India’s growth. Gaming is another industry that will benefit from metaverse adoption. At the moment, mobile gaming is becoming more popular because of the low prices of smartphones and 4G broadband connections.
The growth of augmented and virtual reality technologies is predicted, as they are the technologies necessary for entry into the metaverse.
While 5G will keep the metaverse ecosystem going, the arrival of 6G will make the metaverse more useful. It is said that the gaming industry is one of the industries where early metaverse use cases are predicted.
Fed plans to shrink its Balance sheet! Can they?
At their most recent meeting, Federal Reserve officials discussed plans to raise interest rates and reduce their balance sheet’s asset holdings.
Minutes from the January meeting were released on Wednesday, and they show that members were worried about inflation and financial stability. They also said that they were careful about tightening monetary policy.
Members of the FOMC saw that inflation was spreading outside of industries affected by the pandemic and into the rest of the economy. The meeting summary noted that “in view of the Federal Reserve’s present high level of securities holdings, participants agreed that a considerable decrease in the size of the balance sheet would likely be desirable.”
This comes after a two-day meeting of the Federal Open Market Committee. The committee decided not to raise interest rates just yet, but it strongly hinted that rates could rise as soon as next month.
Inflation affecting Oil & Other Commodity!
The rise in crude oil prices and the impending increase in gasoline prices have left two-wheeler dealers in a pickle. Any more price rises could slow the return of demand at a time when restrictions are being eased.
According to sources, two-wheeler stockpiles are at a 60–90-day high, compared to the typical 25–30-day range. Manufacturers would be forced to reduce dispatches if sales do not improve. Sales of entry-level two-wheelers, which make up about 75% of all retail sales, are expected to fall by 25% if gas prices keep rising above the $100 mark.
Indian aluminium producers such as Hindalco and Vedanta are anticipated to gain from the recent increase in aluminium prices in response to concerns about energy supply disruptions. India is said to be the second-largest producer of aluminium in the world, with a capacity of 4.1 million tonnes per year (mtpa). Russia comes in second at 3.9 mtpa.
Indian aluminium industries rely heavily on domestic coal and are unlikely to experience significant increases in energy prices, which might enhance profitability. According to reports, India exports 55% of its primary metal production, and exports are projected to stay robust as supply from Russia and Europe is disrupted.
Market Volatility, What comes next?
Depending on the scenario, the global economy would either profit from a rapid decline in commodity prices or face a severe bout of stagflation. However, this should not obscure two critical structural challenges that will persist for some time regardless of how the battle plays out.
To begin with, markets are losing their reliance on central banks’ plentiful and predictable liquidity. This unifying theme proved to be an excellent vehicle for the market rally and volatility suppression, shielding markets from a wide range of issues while driving asset prices higher.
With the US Federal Reserve finally attempting to address persistently rising inflation, markets are suddenly confronted with a fundamental shift in their liquidity regime. This means that interest rates will go up and the Federal Reserve’s $9 trillion balance sheet will shrink.
Equity valuations are better now than they were a few weeks ago, but they haven’t yet reached the level that makes stocks seem like a good investment.
That is not to claim that markets are completely devoid of anchoring. The combination of strong corporate earnings and the psychological training of investors enticed to “buy the drop” remains in play. These, on the other hand, are weaker and more dependent on the Fed’s ability to offer an economic soft landing.
The chance of this has been greatly diminished by the Fed’s initial mischaracterization of inflation and subsequent hesitancy in modifying policy. Even though consumer prices are up 7.5% today, the Fed is still pumping money into the economy.
The second structural reason that looms large over markets is the systemic deterioration of market liquidity.
Over the last decade, markets’ risk-absorbing ability has deteriorated significantly as intermediaries have been less able and willing to reveal their balance sheets. This has occurred along with a massive increase in the size of asset holders that transact through such intermediaries.
As a result, this imbalance between supply and demand can result in significant market movements. This is a phenomenon that has manifested itself not only in individual stocks but also in other market segments.
Without a strong unifying theme and the ability to navigate a broad range of possible macroeconomic scenarios in the absence of a first-best Fed policy option, stocks will continue to be sensitive not only to the vagaries of Russia-Ukraine news but also to other factors such as competing for central banker statements and data releases that significantly differ from the median forecast.
This necessitates investors anticipating increased disturbing volatility and possessing a thick skin for dealing with it (remember, many major investment mistakes occur at such times).
Furthermore, it justifies favoring individual names over indexes and subjecting holdings to far more frequent granular quality checks than was previously required.
News for the Week:
- Consumers might begin to experience technology that connects the virtual and physical worlds in a few years, Facebook owner Meta Platforms Inc. told advertising agencies, expanding on its vision for the establishment of the metaverse.
- The Life Insurance Corporation of India (LIC) confirmed its intention to list in March, despite uncertain global markets, indicating the government’s haste to mop up inflows. “We are very much looking forward to the March listing,” Chairman M. R. Kumar told reporters Monday. “We are keeping an eye on” the markets, he added.
- According to the co-founder of Huobi, one of the world’s largest cryptocurrency exchanges, Bitcoin may not enjoy a bull market until late 2024 or early 2025. Du Jun told CNBC that bull markets in bitcoin are inextricably linked to a process known as “halving,” which occurs every few years.
- Bikaji Foods International has filed preliminary documents with India’s market regulator, the Securities and Exchange Board of India (SEBI), for a Rs 1,000 crore initial public offering (IPO). Certain stockholders want to sell around 2.94 crore shares during the IPO.
- According to the Hurun India Wealth Report 2021, the number of millionaire families in India has climbed to 4,58,000, an increase of 11% over the previous year.
That’s all the major updates for the week. See you next Sunday at 10:00 am. Until then, Work hard, stay safe, and most importantly… Always believe in India!
Week’s Website Articles & YouTube Videos:
- DP Wires Ltd - Stock Analysis. Is it Worth Investing?
Russia Ukraine War! Will the Stock Market Crash? What Should Retail Investors Do?!?
- What is PLI Scheme? Importance of PLI in the Indian Economy?
- Top 11 Electric Vehicle Companies to Invest in India
- What is an NFT? How to Invest in NFTs?
- What is a Stable Coin? How to Invest in Stable Coin?
Best Ways to Invest in Gold?