ETMarkets Morning Podcast: Is there more steam left in Indian stocks?

>> Past trends show domestic equity has more steam left
>> Domestic MFs rush to float international funds
>> Chris Wood says equity markets’ fate in Fed hands now
AND
>> Top PSU lenders lining up to invest in bad bank

Hi there. Welcome to ETMarkets Morning, the show about money, business and markets. I am Sandeep Singh.

Let’s start with a quick glance on the state of the markets.

Dalal Street looked set for a major rebound today after the Freaky Friday. Nifty futures traded some 233 points higher in Singapore trade this morning. Other Asian shares firmed up on encouraging vaccine news and soothing comments on inflation from Fed Chairman Jerome Powell. Oil prices rose more than $1 this morning. India gold prices continued to decline, falling Rs 342 on Friday to Rs 45,599 per 10 gm. Silver plummeted by Rs 2,007 to Rs 67,419 a kg on the same day.

That said, here’s what else is making news?

FIIs clocked their largest single-day outflow of a provisional Rs 8,295.17 crore from Indian equities on Friday, but remained cumulative net buyers of index futures — Nifty and Bank Nifty — to the extent of 29,211 contracts on the first day of the March derivatives. They also sold a record $1.37 billion (or nearly Rs 10,000 crore) worth of local debt securities, even as trading volumes in currencies hit a record, pointing to continued pressure on yields amid hardening US rates and energy prices.

This is not a piece of news that can inspire any confidence on Dalal Street!

Domestic mutual funds are lining up a series of NFOs, seeking to meet the need for the resident investor to diversify asset ownership beyond home. Investor folios in international funds have more than tripled — from 1.63 lakh in January 2020 to 5.6 lakh in January 2021. SBI MF has launched its first product, ‘SBI International Access – US Equity FoF’. HSBC Climate Change Fund will invest in innovative companies offering the best solutions for climate challenge. BNP Paribas Aqua Fund of Fund, a niche thematic fund, will invest in companies that cater to water infrastructure, water treatment and utilities. Mirae Asset US FANG Plus ETF is likely to be launched later this month.

It’s now trendy to be in international mutual funds, you see!

Christopher Wood of Jefferies says stock rally has some more steam left. He said he was expecting the bond market selloff. He said as long as the Fed keeps talking dovish, stock markets will continue to rally. The risk to the markets becomes clear that the economies are rebounding more than the Fed was expecting. The risk is that there will be a taper, but for now Powell is still talking dovish. The stock market will keep going up and the bond market will keep selling off until the Fed reacts.

Taper tantrum is a realty which the Fed can only avoid

Have the stocks peaked? Well, they may not have. Going by recent history, yields must harden more before equities in Mumbai are repriced. More importantly, if yields in New York or London head north when accompanied by growth, the mood in Mumbai isn’t circumspect — not in the long run. Equity peaks have historically been preceded by a 130-basis point rise in yields on an average from the trough. Credit Suisse says from the recent trough, yields climbed 80 basis points.

Does it suggest there is a lot more in store for domestic stocks? Only time will tell.

It turns out the Budget proposal to tax interest earned by provident fund contributions exceeding Rs 2.5 lakh annually may make as many as 75% subscribers cut their contribution to the retirement scheme, showed an online survey by Economic Times. Investment experts however cautioned against abandoning PF, saying the voluntary provident fund option is still among the better bets.

The bad bank dream is finally taking some shape. Nine banks and two non-bank lenders, including SBI, PNB and BoB are coming together to jointly invest Rs 7,000 crore of initial capital in a proposed bad bank that aims to help extract funds stuck in bad loans. Two other state-run financiers of power projects will also own stock in the bad bank.

NOW Before I go, here is a look at some of the stocks buzzing this morning…

· Tata Motors-owned JLR is open to the idea of a strategic partner for Jaguar after having decided to convert the iconic brand into an ‘electric only’ range by 2025

· Gautam Adani firm Adani Green Energy is in advanced discussions to acquire a 250 MW Hero Future Energies solar power project located in Jodhpur, Rajasthan.

· Reliance Industries has acquired majority stake in skyTran Inc, a developer of pod car transport systems, increasing its holding to 54.46%, from 26.3%, at an additional investment of $26.76 million through subsidiary Reliance Strategic Business Ventures

· JSW Steel has written to lenders about its intent to complete the acquisition of Bhushan Power and Steel by transfering ₹19,350 crore before the end of March into an escrow account.

·SBI is looking to enter the aircraft leasing business in India. A senior official at the country’s largest lender said the bank is evaluating options to handle aircraft leasing business in GIFT City subject to regulatory approvals and viability

Do also check out over two dozen stock recommendations for today’s trade from top analysts on ETMarkets.com.

That’s it for now. Stay put with us for all the market news through the day. Happy investing!