Fear is that central banks can go too far in taming inflation, and medicine might be worse than the disease, says Max Life Insurance's Mihir Vora | "We are in for volatility going forward, mostly because of global regions and the fact that we have now clear indications that the central bank is now giving priority to inflation as the number one enemy and we have seen most of the central banks, including our Reserve Bank of India coming out unequivocally, saying that, whatever is required to tame inflation, we shall do that. The risk is — and which is what I think the market is now factoring in — that probably the central banks can go too far, and the medicine might be worse than the disease. And that's the fear that the market has at this point in time," said Mihir Vora, Director & CIO, Max Life Insurance.
We are in a downtrend and there are no signs of bottoming out, says Goldilocks Premium Research’s Gautam Shah | "I think we are clearly in one downtrend or a bear market, if you want to call it that, because if you look at the broader markets, I think the average decline from the highs is about 35 percent. The headline indices are not depicting the same, but clearly there has been a lot of damage across the board. And now as this correction is playing out, I think the best in the business, the most fundamentally strong names, are the ones that are coming under pressure because of the global factors. So I think we are in a downtrend, yes, there are no signs of bottoming out, we are likely to see further downside," said Gautam Shah, Founder & Chief Strategist at Goldilocks Premium Research.
We are due for a growth slowdown, says Wells Fargo’s Gary Schlossberg | “The longer term issue is that so much of this inflation run-up has been due to exogenous or outside shocks. And it's still to be determined how much inflation will come off if and when those shocks ultimately subside. How persistent will this inflation rate be? But for now, at least I fully agree rates are moving up. The Fed will remain aggressive, and with higher inflation that will squeeze incomes, we're due for a growth slowdown here,” said Schlossberg.
A real risk down the road is recession, says Geosphere Capital’s Arvind Sanger | “The market realised that inflation is not going away. And just the Fed is not raising interest rates by 75 basis points but by 50 basis points doesn't mean that the job will be done until inflation is vanquished. And for inflation to be vanquished, we don't know how far the Fed will have to go, how long it will have to go. But there's a real risk that as they go down that path, you could see a recession. So I think the market was coming to terms with the fact that you can celebrate as much as you want about 75 versus 50 but the fundamental inflation problem is still around,” said Arvind Sanger, Managing Partner at Geosphere Capital Management.
We shouldn't be surprised if RBI goes 75 basis points in June and says we have come to pre-pandemic level, says Citi South Asia’s Badrinivas | “It's a very clear messaging from them (RBI), that there is an urgency to get to the neutral or a pre-pandemic level — I won't even say neutral — pre pandemic level, which is really the 5.15 percent and removing the ultra-accommodation. So in my view, I think we shouldn't be surprised if they go 75 basis points in June, and say that we have quickly come to the pre-pandemic level and then we do expect a few more rate hikes down in the upcoming policies all the way till the end of the year,” said Badrinivas NC, Head-Markets, Citi South Asia. The expectation, as things stand now, is probably to get to a 6.5 to 7 percent kind of repo rate, he said.