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Talking Points This Week: Going Down... Or Up?

Every week, Niraj Shah studies how top business leaders and market makers are navigating the pandemic-altered financial landscape.

<div class="paragraphs"><p>Attendees ride a roller coaster in Des Moines, Iowa. (Photographer: John Taggart/Bloomberg)</p></div>
Attendees ride a roller coaster in Des Moines, Iowa. (Photographer: John Taggart/Bloomberg)

In ‘Talking Points This Week’, Niraj Shah studies how top business leaders and market makers are navigating the pandemic-altered financial landscape.

Predicting where stocks will be in 12-15 months is an exercise always fraught with risks. But if the mini corrections and the recoveries that we will talk about later are any indication of the volatility to come, it is a fool’s errand right now. This week was punctuated with volatile equity market action, marked the beginning of a series of central bank meetings over a two-week period, Vladimir Putin's visit to India and the defence talks, and the tragic loss of a military hero for India. This piece dwells into markets, the RBI commentary, crypto, and yes, gaming!

Fifth-Time Lucky As Well?

Mini corrections have been bought into. At least, that is what data shows when it comes to 2021. There have been four instances before December in 2021, when the S&P 500 cracked sharply, only to be bought into as swiftly. This chart shows how swift the pullbacks have been.

Talking Points This Week: Going Down... Or Up?

The cloud of taper and rate hikes ensured that not too many people believe that the correction will get bought into. But after touching 16,800, the index has largely held on, despite extreme volatility. It prompted comments of 'Khelo India Khelo' on social media, but select experts still believe that there is a method to the madness. Nirav Sheth of Emkay Global and Prateek Agrawal of ASK maintain their positive stance and advocate buying the recent dip. They believe that a combination of reasonable valuations in the context of how the index is different than what it used to be (and therefore, erstwhile valuation comparisons are futile), as well as the promise of growth keep markets upbeat. Banking and economy-facing sectors remain the top bets for both, as well as select others that BloombergQuint has had on Talking Point.

No News Is Good News?

India’s Monetary Policy Committee expectedly kept the key rates unchanged unanimously and reiterated its accommodative stance both on rates and liquidity. However, Prof. Jayanth Varma’s possible dissent on the continuation of an accommodative stance for the foreseeable future continues to keep MPC in a split state. There were no material changes in growth and inflation outlook in the near-term. The RBI did not opt for a reverse repo hike either, which my colleague and BloombergQuint’s Executive Editor Ira Dugal believes is a missed opportunity to continue normalising, and also because the market was prepared for it and a small hike would have made little difference to bond yields. And if a section of the market is arguing that the RBI has tightened by stealth by absorbing more funds via the variable reverse repo window, Ira asks why does the central bank need to act by stealth? Growth is stabilising and upside risks to inflation can emerge, even though the RBI has currently decided to look the other way, and hence, according to her, normalisation should rightfully move forward.

Volatile Yes, But Will ₿ Correct?

Dire predictions for its demise have been a constant for Bitcoin, the largest and pioneering cryptocurrency, since its debut a little more than a decade ago. Most doomsday predictions have been to little avail. Since getting mainstreamed into public consciousness, Bitcoin has gained multiple times its value over the past five years. But... naysayers refuse to buckle down. This week has been similar. After the cryptocurrency plummeted over 28% in the last 30-odd days, doubts about the ability of the crypto to sustain levels have emerged, with multiple people giving various opinions about technical levels to a speaker asking on Bloomberg TV, "Who’s going to catch that falling knife?” It is a multi-billion dollar question, quite literally.

As Big As The Sport Itself?

Maybe I am late to this, but gaming and esports are now front-and-centre of people’s attention as well as that of business. Picture this: the final of the ‘League of Legends World Championship’, a much sought-after esports event, in 2019 was watched by a peak of 4 million viewers, and in 2021, set an all-time high in terms of viewership numbers, accruing an audience of over 73 million peak viewers. While esports are already very popular outside, India is arriving on the world stage too. As Charlie Baillie of Ampverse wrote in the Times of India, “India is a huge destination for esports as it is one of the fastest growing markets in the gaming space and also a hub for foreign investment with estimates of $120-160 billion per year by 2025. This sector used to be overlooked with only just 25 game developers a decade ago but today is home to over 250 game developers.” One of them, Nazara Technologies, tells BloombergQuint that India is growing fast as a large market, with viewership for some key properties having moved up 15x in the last 24 months. Winners may be difficult to spot, but the space is certainly heating up.

Niraj Shah is Markets Editor at BloombergQuint.