Markets Espresso: The Dharam Sankat of Kevin Warsh and is the K-drama finally over?

Hello Espresso Lovers! We're back with the latest brew! What a week this one has been for the markets; not just here, but across the globe! You may be wondering why would I start off with an image of Pran Sahab doing the tightrope walk in his memorable role as Jasjeet in Don (1978)? That Jasjeet right now is Kevin Warsh, the new Fed Chair, who is on a similar tightrope himself.



Mr Warsh has done enough and more Dialoguebaazi to suggest that he is in mission mode to bring inflation down. But when the time came for action, he chose to back-off! He was not one among the three dissenters! He also did not give any forward guidance. The markets did not like that behaviour. The US markets sold-off sharply that day. Even though they recovered all those losses over the next two days, the bond yields are at multi-year highs. A new headache is loading.

But why the tightrope? Well, it is a Dharam Sankat that Mr Warsh finds himself in. On one hand, he knows that rates will have to be raised in September if the situation does not improve. On the other hand, he has a President who wants the US to have the lowest interest rates in the world. Warsh is trying to have the best of both worlds, but even he knows deep down he will have to pick a side sooner or later. A rate hike will not be appreciated by the markets, nor by Trump, but no action would also cement the belief that Warsh does not have any independent thinking of his own.

Kursi ke peti bandh lijiye.



The index of the week unsurprisingly and undoubtedly has to be the KOSPI. Chaos, madness, wild plot twists- everything you'd associate with an Indian daily soap has been playing out in South Korea. According to a Citi note, retail investors have lost nearly $40 billion during this market meltdown by trying to buy leveraged products after selling their insurance policies, breaking fixed deposits, and spending their lifelong savings. Now that is a K-Drama we were not anticipating. But wait, there's more!

Such was the extent of the crisis that the country's finance minister had to apologise to the people. More regulatory curbs have now been imposed, and it took the SK Group Chairman (owner of SK Hynix) to buy shares from the open market to send out a message that we are here for the long run! What did the market do? After all the wild swings, the KOSPI surged 18% on Friday, the most in a single day on record. SK Hynix jumped 30%, Samsung was up 27%, and Seoul finally had some soul breathed into their life. But is it really a happy ending? Not really. The burnt retail investor group was still a net seller. Is this the end of the K-Drama or the start of a bear market rally? Only time will tell.



We spoke to you about the art of defiance last week for our markets, something that continued this week as well. For every bad news thrown at them, be it Iran, crude, Fed, chip stocks...everything, the Indian markets just about found a way to grind higher. It has not been a massive breakout yet, nor has it crossed the important hurdle of 24,500, but the Nifty is slowly but surely grinding higher.



If the market moved higher this week, it owes a profuse amount of gratitude to Indian IT. Yes, IT, the same IT that has been the backbone of the underperformance over the first six months this year. The one sector that channelled its inner Feroz Khan from Welcome (2007) was Indian IT. While chip stocks were having a meltdown, Indian IT chose to reiterate that they are still around. Infosys, TCS, HCLTech, Persistent Systems, Coforge, all of them stepped up during the week. The Nifty IT index signed off from July with returns of nearly 17%, the most it has delivered in a month since 2020, which incidentally also came in the month of July! And the IT Zinda hai analogy was corroborated by none other than the outgoing Infosys MD & CEO Salil Parekh. "Bilkul Zinda hai!" is what he said in an exclusive conversation with Shereen Bhan!



Two stocks have defined the form is temporary, class is permanent analogy this week. Microsoft is one, Bajaj Finance is the other. The street rewarded Microsoft simply for its clarity on what it plans on doing. They kept their spending targets the same but with a caveat that if more work comes their way, they will have to spend more. The street was fine with that. It added $450 billion to its market cap on Thursday, the most in a single day by any company in history! That $450 billion is higher than the market cap of 96% of S&P 500 constituents and also higher than the total market cap of many countries, including South Africa and Türkiye.



Bajaj Finance's results were strong, and the management also went on to say that they will possibly raise their full-year guidance at the end of the second quarter. The results and strong management commentary prompted upgrades and target hikes for one of India's largest non-bank lenders. The stock surged 8% on Friday, the most since July 2022, added over ₹50,000 crore to its market cap, and after slumping to a 52-week low in April, it is now at record highs. And true to character, our friend Yoosef is ready with his nuggets every time something like this happens. After the rally in Bajaj Finance, the Bajaj Group overtook the HDFC Group in market capitalisation!

Guess the people investing in South Korea have learnt the message that Kenneth Andrade of Old Bridge Asset Management has for our investors too - that being adventurous will not pay off in this market. He likes stocks like M&M, Maruti, Balkrishna Industries, Shriram Finance, Radico Khaitan and also expects the entire Pharma sector to outperform the broader market through FY29.



Amish Shah of BofA Global has turned positive on the Indian markets as well. He too recently upgraded Indian IT to Neutral from Underweight but is still not structurally bullish on the sector. He expects the Small and Midcap earnings premium to the Nifty to remain strong over the next three years, although he expects the Nifty to also move 9% higher from current levels. He finds value in upstream energy and financial companies, such as exchanges, brokers, and travel & tourism. He also finds greater value in power financiers than equipment players.



Mirabai Chanu is a legend! She just turns up at every event, does her job, wins her medal and disappears until the next event. It's unfortunate that they don't get the hype as much as some of our over-rated cricketers do. She added one more feather to her already illustrious cap at the Glasgow Commonwealth Games! Not just her, Sharmila Dhankar, Dilip Gavit, Asmita Dey, Harsh Singh, all of them have been India's Golden athletes at Glasgow and done the country proud! Listening to Jana Gana Mana every time at an event, particularly in a foreign land, gives you goosebumps you cannot describe. Our salute to our golden icons!



The Fed is done with its bit, as is the Bank of Japan. It's now the time for the Reserve Bank of India to deliver its policy decision, which it does so next week. We also start to bring the curtains down on yet another action-packed earnings season, but not before many other companies disclosing their numbers for the quarter gone by. Starting next week, we will also have a special closing session for stocks under F&O. It's time to take your leave for the week. But do share, like, and subscriber to our newsletter and follow us on our social media platforms! Our Gen-z newsroom tried to teach me the Korean translation for Goodbye, which I, true to my millennial roots, have conveniently forgotten! A happy weekend to you all!