Vinod Bhat's Market Pulse - Aug 2, 2022
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Globally, growth data continues to show a slowdown. In the US, ISM Manufacturing PMI edged lower in July as new orders contracted and prices softened. In Germany, retail sales declined month-over-month. In China too, factory activity contracted unexpectedly in July and the PMI fell into contraction territory.
Following disappointing data from major world economies, Brent crude prices once again slipped 7%+ to $99/bbl. With slowing growth and signs that inflation may be cooling, the US 10-yr yield slipped to 2.6%.
Diminishing odds of aggressive Fed rate hikes have started weighing on the Dollar and the Dollar Index has fallen to 105 levels. Lower crude prices have led to FIIs coming back to India which is supporting the Rupee.
One way of analyzing the current market movements globally and in India is to just hand over the entire credit to the Fed. The other way is to look at what companies in specific geographies are saying, in aggregate, about the demand-supply situation, and search for more fundamental signs of acceleration in the economy.
As far as India is concerned, a) demand commentary is mixed with moderation expected in some sectors, expected recovery in rural, and sectors like travel, leisure, entertainment, out-of-home dining which are tied to the re-opening of the economy doing well, b) supply chain challenges remain esp. in auto components, c) margins have moderated across sectors owing to commodity or wage inflation, and d) while exports were strong, they may moderate in the coming months.