Measuring the Fund Flow Winds

A JPMorgan report last week advised global investors to add risky assets as analysts believed there was already a lot of negativity in the price. The note read: “Looking ahead, we think it’s important to remember what path we were on before the crisis started: namely, the global economy was on track to accelerate strongly as the Omicron wave reopens, with factory output rising , stocks are dwindling and mobility and services are recovering Despite the current tumultuous environment, we believe a lot of risk is already priced in, sentiment is low and investor positioning low, so we would increase risk with a medium term horizon .”

The advice seemed forward-looking and markets have since consolidated. But the trillion dollar question is what now? While JPMorgan believes the correction over the past month has caused too much negativity in the markets, the Bank of America Global Fund Manager survey points out, fearing that growth will be severely affected by the war — not counting China’s lockdowns – pointed out that liquidity levels with fund managers are the highest since April 2020 and optimism around global growth is the lowest since the Lehman crisis of 2008. A statement sums up what appears to be BofA’s stance, following this survey: “BofA Bull & Bear Indicator at 2.8, ie not yet ‘extremely’ bearish; Positioning + policy = too early for contrarian buy call = we remain tactically and cyclically bearish.”

If we localize the flow analysis completely, March could be a strong month for domestic flows, with the possibility that domestic flows will be very strong due to the influx of tax-saving funds, as well as multi-cap inflows. Varinder Bansal of Omkara Capital wrote in his note to clients on Wednesday morning that local fund managers told him about the possibility of inflows of Rs 25,000-30,000 crore in March. That would be a sight to see.

This post Talking Points this week: micro over macro?

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