Wednesday, May 25, 2022

HOW LONG DO YOU EXPECT THE MARKETS TO BE LEAN? IS THERE NO CLARITY YET?

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It is very difficult to predict when the market will experience a trend reversal. The reality is that even historically we have to wait for the market to digest that the rate hike cycle is over. When the market comes to this realization, things will change.Even on Tuesday, the Fed chair was at a WSJ seminar and generally spoke in a very aggressive tone. He mentioned that inflation is his primary goal. He doesn't have to worry about other things now. This sends a very clear signal that they will do everything they can to contain inflation. However, I have to say that and I have to say here that these things are sending a very strong signal to the market and there will likely be more and more interest there. It is very difficult to predict these geopolitical developments and if there is a truce, we may be surprised to find that things have suddenly turned around and buoyancy has returned to the market. Risk appetite will return to markets and central banks around the world will not be under the intense pressure they are facing today to contain inflation as inflation slowly moderates as commodity prices fall.

I definitely think diagnostic spacea good area to be in for the long term, but I'm pretty sure this isn't the time to nibble. Check out what's going on with Dr. Lal Path Labs happened, margins are definitely under pressure. They could pick up somewhere in the next quarter or so, but that won't change the reality.Tata 1mg speaks of introductory prices that are well below those of the established players. They could pick up somewhere in the next quarter or so, but that won't change the reality. Another factor that we need to keep in mind, and this is the long-term trend, is that it used to be a very fragmented, unorganized sector, or rather unorganized, and small diagnostic centers seemed to do most of the work. Now it's shifting to the organized sector, the big chains, and those chains will eventually take advantage of economies of scale.. Dr. Lal Path Labs used to have a lab for about nine collection centers. Now it has moved to a laboratory for 20 collection centers. In the future, it's likely to go even significantly higher from current levels, and that creates a lot of economies of scale, leading to cost savings and margin improvements. But while margin is improving there are structural market forces that are significantly lowering margin due to pricing pressures and we need to keep that in mind and monitor this space carefully over the long term, but this is not the right time to go into it.

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