Will mid and small caps continue their outperformance? A Balasubramanian answers
«I think it is an interesting trend, as you rightly put it, whenever the interest rates go up to significantly higher level, generally the assumption that all of us make is the cost of capital for companies will rise, therefore it will have an impact on the expansion and for the future growth and therefore the market generally tends to correct,» says A Balasubramanian, MD & CEO, ABSL AMC.
So far so good, no one is complaining, I just want to bring your attention to what is happening in the world in terms of the global macro positioning, bond yields are at 15 year high, crude is on a boil again, US economy is doing well, dollar index is rising. When these factors come together, markets historically has gone down but so far both global markets and local markets have resisted the fall.
I think it is an interesting trend, as you rightly put it, whenever the interest rates go up to significantly higher level, generally the assumption that all of us make is the cost of capital for companies will rise, therefore it will have an impact on the expansion and for the future growth and therefore the market generally tends to correct.
This time I think what the difference that we see is, I think if you look at the US, a very interesting trend we are seeing, I think we have moved away from a possible recession to a mild recession, even mild recession also now it seems to be ruled out.
How extraordinary, you know beginning of the year we were speculating mild recession, hard landing, soft landing, or a dip, and now we talk about Chandrayaan 3 in that context. It just amazes me.
I think if you look at it, job market in the US is surprising and continues to do well and the US has started spending money on infrastructure building therefore
