Even the most ardent supporters of the India growth story are finding it difficult to ignore the state of the world markets, which is deteriorating rapidly. Along with promoter and private equity selling, more accredited institutional placements are occurring. As a result, there is now a negative outlook for the world, persistent selling by foreign funds, and an influx of new shares into the market. Can the bulls withstand this turbulence?
Eicher Motors
On Tuesday, the stock lost over 3% of its value. F&O data shows an increase in short positions. After Bajaj Auto and Hero MotoCorp announced their entry into the premium bike market in July, the stock never truly recovered. Eicher devotees claim that the new competitors have not yet shown that they can scale up quickly enough to be able to take significant market share. However, the stock price suggests that the skeptics are more numerous right now.
Who owns them?
In any sector that is popular with investors during a bull market, it is typically the operators that profit the most. It’s rumored in trader circles that none of Dalal Street’s household names have been able to cash in on the ferocious run in defense and railroad companies. As they choose to ignore the hazards typically connected with PSU equities, many individual investors, on the other hand, appear to have had better experience. As they say, happiness sometimes comes from ignorance.
Yes Bank
Even though it is one of the underperforming bank companies, it has managed to outperform several of its competitors on one important operational metric. According to the bank’s second-quarter update, the growth of its deposits (17.5 percent) was almost twice as rapid as that of its loan book (9.5 percent). Deposit growth was 6.8% percent more than loan book growth of 5.2 percent, quarter over quarter. What remains to be seen is whether or not that will significantly impact the bank’s net interest margin.
APL Apollo Tubes
According to the company’s business update, quarterly sales volumes were up 12 percent year over year to a record 6,74,761 tons. But was the positive news taken into account already? The stock increased by 63 percent between late May and early September before declining after that. At almost 60 times trailing 12-month earnings, the stock is far from being inexpensive, but the price seems to suggest that many people are buying into the narrative. The recent acquisition of an NBFC will result in a reduction in the working capital cycle for the company because distributors can now receive funding through the NBFC arm.
Vedanta
Unenthusiastic business update for the second quarter, with overall aluminum production up 2% from the previous year and mined metal production down 1%. The majority of analysts continue to hold a cautious outlook, but the number of outstanding short positions in the securities lending and borrowing window has substantially decreased over the past 15 days, going from 2.41 crore shares to just 15 lakh. Vedanta was one of the two shares with the most short holdings in absolute terms over a considerable period of time. Right now, it is at number eight.
Avenue Supermart
At the time of the first quarter business update, analysts’ quibble was that the share of general merchandise and apparel sales in overall sales was not growing fast enough to boost profit margins. The same gripe seems to hold for the second quarter as well. And given expensive stock valuations, the Street is much more demanding. Citi has retained its sell call on the stock citing ‘inferior product mix’, meaning low-margin goods like provisions selling more than the high-margin ones
VIX
Traders are frightened by the increase in VIX, often known as the fear index, on a global scale. Following the instability involving US lenders in March, the Cboe Volatility Index increased 2.2 points to 19.80, putting the spot price above its three-month futures for the first time. Inversions like this one have twice signaled market bottoms in the past year. Even if the India VIX has been slowly rising at home, there are no signs of fear among option traders.
Rate cut or rate hike?
Wall Street expects the Fed to lower interest rates at some time in 2024. Bond investors, though, are less certain. That helps to explain why, despite bond rates being at a decadal high, money is not flowing into bond funds at the rate it ideally should have. Investors seem unwilling to invest until they are more certain that rates have peaked, according to the Wall Street Journal, as a result of the relentless losses in the bond market. Veteran investors have a proverb that says to always believe the bond market when it contradicts what the equities market is saying.
Resurgent yen
According to Bloomberg, the yen increased from a 52-week low against the dollar on rumors that Japanese authorities were taking steps to stop the yen’s decline. In New York trade on Tuesday, the value of the yen dropped to 150.16 per dollar, the lowest level since multidecade lows achieved in October 2022. For those who carry trade, a strong yen is terrible news because they borrow money in yen, convert it to dollars, and then invest it in other markets for a better return. The carry trader will require more dollars for the same amount of yen at the time of repayment if the yen gains.
Mortgage rates
According to CNBC, who cited information from Mortgage News Daily, the average interest rate on the popular 30-year fixed mortgage in the US increased to a 23-year high of 7.72 percent on Tuesday. To put that into perspective, the monthly payment is currently around $930 higher than it was when rates were at 3 percent during the height of the Covid-19 outbreak for a borrower purchasing a $400,000 property with a 20 percent down payment on a 30-year fixed loan.