The Americans voted on Tuesday, and markets spent the rest of the week deciding what they had voted for. A Democratic Party sweep took both the House and the Senate in a contest that Republicans now concede, with reluctance, as historic. Trump himself acknowledged that the Iran war played a role in the defeat.
And then, with the peace dividend barely booked, came the other half of the week’s mood: the AI apocalypse. A market that had just cheered the end of one catastrophe found another. Chip stocks took the brunt of the selling. Major investors are now said to be increasingly sceptical that Anthropic’s IPO can proceed at the expected $1.5 trillion valuation.
What with a war that may or may not be over and a technology that may or may not be a bubble, investors this week were reminded of TS Eliot’s famous line, “Humankind cannot bear very much reality”. No wonder the CBOE Vix shot up nearly 70 percent on Thursday.
But it’s Diwali and the Indian markets thought it’s time to celebrate. FIIs are back and almost everybody is now saying India is an anti-AI hedge. Indeed, the Q2 corporate results read like the hedge in action. Among the heavyweights, SBI posted a steady quarter with a good outlook for the second half, RIL’s O2C business drove a record performance, and LIC is hoping better margins and business mix can earn it a re-rating. These are the domestic, balance-sheet-heavy names that the AI trade never had any use for, which is why a hedge buyer might. Moneycontrol Pro’s researchers have analysed many other such results — Their recommendations are listed in the ‘Stocks’ section at the end of this missive.
In fact, things seem to be getting even better — The HSBC India Composite Purchasing Managers Index for October, a snapshot of seasonally adjusted month-on-month change in private sector activity, was 56.2 in October, up from an already decent 55.9 in September. Best of all, the aggregate rate of inflation retreated to the softest since February 2022. Combined with lower oil prices, lower bond yields, and a stronger rupee, there are good reasons for the market’s optimism.