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“If the market’s going wild and you want to be in it, either lower your standards to stay in the game or buy stuff which may not participate because it’s not part of the game at that time.” – Walter Schloss
Consensus view is that the RBI will keep interest rates unchanged. Brokers say this has been factored into prices, and the upside appears limited even if the RBI commentary is dovish. For now, the market appears to have moved past interest rates, and the focus is on institutional fund flows.
Coal India
Total short positions in the Securities Lending and Borrowing (SLB) have now risen close to 10 million shares. Coal is a dirty fuel, alright, and the stock has not exactly been a hot favourite with the market when viewed from the perspective of those who have been holding the stock for years. Besides, coal being a sunset energy source, the promoter—government of India—has not been helping matters either.
The steady offering of shares at regular intervals at a discount leaves investors with no incentive to buy the stock. Since April 2013, excluding dividends, when the stock was trading around Rs 310, it has been
compounding at minus three percent annually. In this period, the company gave a total of Rs 205 as dividend.
Adding back this amount to the stock price, the return to shareholders who remained invested in the company would have been an annualised 3 percent. This compared to a near-trebling of the Nifty during the same period and compounding at 11 percent annualised. There have been trading opportunities in between though. And yet there is a catch. If you are playing just for the dividend yield, you need to get your entry point and the timing right.
Siemens
The stock is slowly clawing its way higher after the massive sell-off last month as the market felt minority shareholders were getting a raw deal in the sale of the company’s low voltage motor unit to the parent. The stock rose around 2 percent on Wednesday and F&O data points to short covering of positions. With capex and strong order books being the flavour of the season, seems bulls are willing to overlook corporate (mis)governance allegations. Chatter on the street is that the company has managed to pacify institutional investors holding the stock.
Titagarh Wagons
The company has said that it is planning to raise funds through either a rights issue or qualified institutional placement (QIP). Appetite for the railway growth story is still strong, though institutional investors have been slow to buy into it. A rights would have to be at a discount to market price, and if the company takes this route, the stock could see some short term profit booking. On the other hand, a QIP, if it happens at a premium to market price could lift sentiment for the stock in the short term. But either way, floating stock of the railway rolling stock major is set to rise in the short term.
Not so smart after all
Individual investors feeling bad about not being able to make the most of the equity market rally can take heart. Wall Street pros or the so-called smart money, who have been mostly getting it wrong since the start of the pandemic, are seeing their 2023 strategy calls flopping.
From Bloomberg:
“Misfiring strategies include selling Big Tech stocks, snubbing the dollar, and buying into the promise of emerging market equities as China emerged from Covid lockdowns. Instead, US growth shares are on the cusp of a full-blown melt-up, while Chinese stocks sink into a bear market. Rather than falling, the greenback has strengthened, including a 6% surge versus the Japanese yen.
Those betting equity returns would be dwarfed by fixed income — in part thanks to one of the best payouts in decades — have also been wrong-footed. The MSCI index tracking global shares is up 10%, compared with a gain of 1.4% from bonds worldwide.”
Steady crude
Oil prices will not average more than $80 per barrel in the second half of this year, despite the most recent production cut announced by Saudi Arabia, the US Energy Information Administration (EIA) said in its latest Short-Term Energy Outlook (STEO). Crude oil prices have been rangebound of late as the market is more worried about a global economic slowdown than crude oil being in short supply.
Despite the Saudi cut and the extension of the current OPEC+ cuts through 2024, the EIA expects production growth in non-OPEC producers like the United States, Norway, Canada, Brazil, and Guyana to limit upside in oil prices.
Green metal
Copper prices may have been under pressure of late, but it still remains the best bet for investors looking to play the energy transition theme, according to Citi. The firm’s commodity expert feels prices could slip further in the short term, but should once again start rallying as the outlook on global growth improves and orders from car makers and grid operators start pouring in. And when that happens, index tracking investors and hedge sniffing for returns won’t be too far behind, setting off a virtuous cycle in the commodity’s price. At present, hedge funds are highly bearish on copper, evident from their net short positions.
Golden opportunity?
Even as concerns over inflation are receding, there are enough investors who feel that gold is a good thing to have in the portfolio. Global physically backed gold ETFs recorded a third consecutive month of positive flows after adding 19 tonnes in May, taking collective holdings to 3,478 tonnes by month-end, the World Gold Council said in its latest report on Wednesday. Total assets under management fell slightly by 0.4 percent to $220 billion due to a lower gold price in the month compared to April. Nonetheless, May’s movement took year-to-date gold ETF flows into positive territory at $1 billion, which is equivalent to a 6-tonne increase in holdings.
Silence of the Champs
When even Elon Musk goes into monk mode, you know something’s up. In the last few months, a host of Western corporate titans, including Musk and Goldman Sachs’ David Solomon, have travelled to China to meet business partners and top government officials. One common thread running through these high-profile visits is that the guests have refrained from talking publicly about their trip.
Musk, known for kicking up a storm on Twitter almost daily, didn’t tweet even once while he was in China last week. As they say, when in Rome….
N Mahalakshmi and Abhishek Mukherjee contributed to this article
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