IGI Logo

"The markets have shown some buoyancy since the beginning of August this year rising by 4.6%, primarily led by the technology pack which has continued to outperform, rising by a huge 8.5%. The strength seen in consumers and banking stocks recently has been modest. Cyclical sectors such as reality, metals, mid-cap, small cap indices and high beta sectors have seen corrections or underperformance. Metal sector that had seen a rebound towards the end of July this year has seen some flattening. It has been the strongest performer since the Covid-low in March last year with a rebound of 290%, followed by Small cap (213%) and Technology (200%).

Hence, the rally is not broad based, which reflects lack of conviction. The truncated nature of market performance, reinforces the point that the pure liquidity driven rally and multiple expansion are probably behind us. Global inflections including rising evidence of peaking global growth which is evident now in China and US, US tapering - the stance of US central banks and correction in commodity price bubbles will define the market conditions, going forward. High inflation permeating into most countries, especially developed markets, is also significantly contributed by persistence of supply chain disruptions, which have compounded the impact of post pandemic demand recovery. While the common belief is that the disruption will linger on for a long time, our view is that we will see evidence of improvement in the coming months, running up to the end of 2021. This in our view should result in correction in commodity prices; thus providing support to export oriented and resource intensive manufacturing sectors, especially in the consumption space."

Above views are of the author and not of the website kindly read disclaimer