Keeping USD at Elevated Levels Can't be a Prudent Move

The Indian markets are trading in the red, along most of its Asian counterparts. The BSE Sensex was last seen at 57,401.14 down 265.08 points (-0.39%), while Nifty was last seen at 17,060.50 down 72.60 points (-0.37%).  Photo: India Times

Though Asian markets are down, Dax is seen trading in the Green. The US interest rate hike has spooked the market sentiments and pre - Deepawali mayhem is seen mostly in small and mid cap counters. But this should be the last selling before the Deepawali Rally begins from next week.

The US wants to forcibly bring down Ïnflation by slowing down its Economy.  The minutes from the Fed's September meeting showed that officials remained concerned about inflation and the effect of interest-rate increases.

However, I feel keeping Dollar at Elevated Levels, can't be considered a good economic move. The sovereign republics will trade in their local currencies, whether USD remains strong or weak. Keeping the Dollar index boiling, will increase the import bill of the US, which in turn will push up the prices. 

Hence, I feel this mad exercise of increasing interest rate at high pace to slow down Economy in order to contain inflation is not a prudent move, but a copy book style no - brainer response to target Ïnflation. This will further create supply side issues, as Imports will get costly and new capacity addition will get jolted.

Meanwhile, the Bank of England was in the bond market buying heavily. The Bank of England insists its bond buying program will end Friday, despite calls for an extension.

In another significant development, International Monetary Fund has warmed this week, that Global Central Banks’ moves to quickly raise interest rates is fuelling increased risks to the financial systems of sovereign republics.

The Federal Reserve and other central banks have been raising interest rates at the fastest pace in more than four decades to beat back inflation,  through slowing of economic growth. The risk is that rate increases can cause disruptions in lending, which swelled when rates were low. 

An IMF report said, "Amid high inflation and significant economic uncertainty, global stock and bond markets have been highly volatile, during the last few months, with investors aggressively pulling back from risk taking". 

Fund officials and global policy makers are holding meetings this week in Washington to rivet any solution to the ongoing turmoil. Anyway, when stocks stabilize, pick up good beaten down counters.

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#Indowind Energy Ltd (Rs.13.25), is scheduled to have a board meeting on 17 October, 2022, when they might take up the Rs.50 Crores Rights issue. Accumulate!!

#Aban Offshore Ltd (Rs.50.20), India's largest offshore drilling company in the private sector, should do well when the crude oil is near $87/barrel. Accumulate, with a price target of Rs.71.

#Accumulate RTN Power Ltd (Rs.4.35), with a SL at Rs.4.20. The company has a steady Business model, through its Amravati plant. The talks of debt recast are going on for its Nashik Plant. The company hopes to become debt free in the next 2 years. When coal prices are reducing, we might see very good quarterly results in the coming days. How can this company with such land holdings and steady Business model, fail? Use your brains, my dear...🙂🙂

#Adani Power Ltd (Rs.348), should also get benefited from the fall in the price of coal in the international market. It is one of the cheapest Adani Group stocks. We can expect it to cross Rs.400, once again this month.

#Suzlon Energy Ltd (Rs.6.85) might again test Rs.6.20. There is a lot of uncertainty regarding it succession issue. I had asked all to exit the counter when it was Trading around Rs.8/9, post Tulsi Tanti's death. 

#Today in Twitter, I had suggested all to exit from Zomato Ltd (Rs.61.50), when it was Trading around Rs.64, due to spiralling up of corporate governance issues. I have doubts regarding its Q1FY23 Result. Exit! The call is closed. You'll not get any update from me in future on this counter.

#Buy the shares of my old favourite, Coffee Day Enterprises Ltd near the CMP of Rs.50.70, T: Rs.72, SL: Rs.47. 

Coffee Day Enterprises Ltd has reduced its consolidated net loss to ₹18 crore in the first quarter (April-June) of the fiscal year 2023. Last year, the company posted a net loss of ₹117.28 crore in the same period. The revenue from operation jumped to ₹210.49 crore as against ₹81.52 crore in the corresponding quarter last fiscal. Restaurant stocks will do well in this festival season.

#The stock of Wockhardt Ltd (Rs.241), should do well due to the aversion of Economic crisis in the UK. Buy with a target of Rs.277.

#With Europe looking a little better once again, you can start accumulating Textile Companies. Buy Nitin Spinners Ltd (Rs.208.95) and Nahar Spinning Mills Ltd (Rs.303).