Talking Points This Week: Micro Over Macro?

Gauging The Fund Flow Winds

A JPMorgan report last week advised global investors to add to risk assets, as analysts felt that a lot of negativity was already in the price. The note said, “Looking ahead, we think it is important to remember what path we were on before the crisis started: namely, the global economy was on track to accelerate sharply on re-opening from the Omicron wave, with factory output surging, inventories lean, and mobility and the service sector rebounding. Despite the current tumultuous conditions, we believe a lot of risk is already priced in, sentiment is depressed and investor positioning is low, so we would add to risk with a medium-term horizon. ”

The advice seemed prescient, and the markets did consolidate since then. But the trillion-dollar question is what next? While JPMorgan believes that the past month’s correction has induced too much negativity in markets, on the fear that growth will be severely affected by the war — not counting the Chinese lockdowns as yet — the Bank of America Global Fund Manager survey points out that cash levels with fund managers are the highest since April 2020 and the optimism around global growth is the lowest since the Lehman Crisis period of 2008. One statement sums up what BofA’s stance seems to be, after this survey: “BofA Bull & Bear Indicator at 2.8, ie not yet ‘extreme’ bearish; Positioning + Policy = too early for contrarian buy call = we remain tactically & cyclically bearish. ”

Localizing the analysis of the flows entirely, March may be a strong month for domestic flows, with possibilities that the domestic flows may be very strong due to tax-saving fund inflows, as well as multi-cap inflows. Varinder Bansal of Omkara Capital wrote in his Wednesday morning note to clients that local fund managers tell him about possibilities of inflows touching Rs 25,000-30,000 crore in March. That would be a sight to see.


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