Episode 5 min
0:00 brent crude surged past $95 a barrel this week and that one number explains why the sensex dropped over 500 points on wednesday and why the reserve bank of india suddenly has its hands tied last week in episode 20 you and i talked about the strange disconnect between surging gdp and a nervous market this week that $95 oil0:24 just poured gasoline on the fire here are the headlines you need to know the market is flashing red with the nifty 50 falling 144 points and the sensex tumbling 541 points to close out a four week losing streak this isn't random it's a direct reaction to geopolitical tension in the middle east pushing oil prices to a six0:47 week high that pain is radiating through the system the ten year indian government bond yield climbed to 6.97 that number sounds technical but it's the market's way of saying it expects inflation and tighter money from the rbi the rupee is also feeling the pressure weakening against the dollar and foreign portfolio investors they're still on the sidelines with1:11 weak flows adding to the volatility but here's the counter signal while foreigners hesitate domestic institutional investors are not panicking they're rotating moving capital decisively into financial services it and capital goods they aren't running for the exits they're just changing rooms so what does this all add up to you have a classic tug of war on delall street1:36 it's the short term panic versus the long term story and right now the panic is louder let's break down the short term case it's all about oil when brent crude hits $95 it's a direct threat to india's economy one of the world's biggest importers think of it as a tax on everything it drives up costs for transport1:58 for manufacturing for plastics for power that feeds inflation and when inflation looms the rbi can't cut interest rates in fact rising bond yields show the market is pricing in the opposite as analyst sonam srivastava put it crude oil not the fed holds the key to rbi policy and the market rebound that's the entire bear case in one2:20 sentence geopolitical risk is no longer a distant headline it's showing up in your portfolio2:29 but if you only listen to the panic you miss the other side of the trade you miss the pattern we've seen this before an external shock hits sentiment turns negative and everything gets sold off but the smart money doesn't just look at the ticker it looks at the fundamentals and the fundamentals are telling a very different story2:55 this is the long term bull case nimesh chandan a cio managing $4,000,000,000 sees four distinct bullish signals lining up first improving macro conditions second powerful earnings growth third expanding credit and fourth a market sentiment cycle that is just beginning to turn positive this isn't wishful thinking morgan stanley is forecasting a multi quarter growth upcycle they project indian3:24 companies will compound their earnings by 19% annually for the next three years let that sink in 19% that kind of growth can absorb a lot of bad news it's why their base case sees the sensex hitting 89,000 by june of next year so where is the smart money going look at the domestic institutions they are not selling3:45 india they are selectively buying the engines of the next leg up financials because credit growth is the fuel of the economy capital goods because companies are finally spending on expansion and it which gets a tailwind from a weaker rupee they are looking past the $95 barrel of oil and looking toward that 19% earnings growth they understand that4:06 geopolitical flare ups are temporary but the compounding power of a growing economy is a long term force this week sets up a clear choice for you as an investor you can trade the headlines watching the minute by minute fluctuations of crude oil or you can invest in the underlying trend which is one of the most powerful earnings4:24 recovery cycles we've seen in years the headlines are screaming about risk but the balance sheets are whispering about opportunity
