Dalal Street may stay range-bound until US Fed turns dovish; high earnings downgrades on cards By Kunal Valia India’s Foreign Exchanges Reserves have come down from USD 630bn in Sep 2021 to around USD 580bn in July 2022. This is on the back of selling in Indian equity markets by FII. FII Sell-off is not just restricted to India but widespread across emerging markets as well as quite a few developed markets. The Sell-Off has been triggered due to an aggressive rate hike by the US federal reserve on the back of roaring inflation not seen in decades. Also Read: LIC share price deep in red this year, but may gain well now; analysts bullish, see this much upside July 22 saw a sharp decline in FII selling and closed with mild positive flow and there is a turnaround in August to date with positive inflow of Rs 8600 crore till August 4. This shift is based on a few assumptions which are yet to fortify – We are past the peak inflation in US and Fed is likely to turn dovish post-2022 i.e., Fed Pivot We are yet not confident that inflation is likely to drop to Fed’s Comfort level this year and whether recessionary trends are broad-based in US Economy as the Unemployment level is not rising and Wage Growth has been upward sloping. So, the current turnaround instance of FII with regards to India is yet to be confirmed. However, we believe a large part of FII selling in India is past us and we will monitor the Growth-inflation Dynamics for few quarters so to be certain. Indian Equities is back above long-term PE and PB following strong comeback in July and August till date. Also Read: India’s export outlook weak, hawkish central banks may weigh on growth, demand; oil prices, gold imports key Going ahead the journey of central banks from reflationary policy to disinflationary policy through high cost of capital coupled with high commodity prices may lead to higher earnings downgrades than what is estimated currently by Equities. While Short term priority is to bring down inflation at any cost, in long term we doubt that central banks will be willing to risk a prolonged stagflation/ recession. In such a data-dependent scenario, equities may continue to stay range bound as has been the case for several months till the hope of Fed Pivot turns real. (Kunal Valia is the Chief Investment Officer – Listed Investments, Waterfield Advisors. The views expressed are the author’s own. Please consult your financial advisor before investing.)
The move had also prompted the country’s largest organised retailer Reliance Retail to step into the value retail segment with Yousta, which was announced on Thursday. Like Intune, Yousta began its operations in Hyderabad, with plans to expand across the country. Intune has three stores – two in Hyderabad and one in Dombivli, near Mumbai, with plans to add another three more outlets in the coming months.
Nair had admitted on a recent earnings call that the apparel segment in general was witnessing moderation and that the value retail foray by Shoppers Stop could help the company tap into the growing trend for affordable fashion and lifestyle products, aiding sales growth.
That was an important statement for Shoppers Stop, which reported a nearly 37% year-on-year drop in net profit to Rs 14.5 crore in the June quarter of FY24, even as revenue grew only 4.8% versus the previous year to nearly Rs 994 crore.
On a yearly basis, the company had last reported a net profit of nearly Rs 114 crore in FY23 after three consecutive years of loss between FY20 and FY22 due to the Covid-19 pandemic. FY23 topline also jumped nearly 60% year-on-year to Rs 4,022 crore, the highest in six years, its results showed.