60k: Market’s Second Innings?🏏
Roller coaster ride: India’s equity markets are in a party mood again. Bracing volatility on the back of unprecedented spoilers like war, military strikes, decade-high inflation, record low Rupee, and the love-hate relationship with FIIs, we finally see some greens back in our portfolios. BSE Sensex crossed the 60k mark this week almost 10 months after its record high of 62k back in Oct last year. One wobbly ride from 60k to 60k again!
The million $$ question: Is this level sustainable? As much as we hate to say it, but we need more confidence here. War mood seems to be around with another one looming and China recession jitters are still keeping the investors on the edge. So, why markets are rallying in spite of pessimism overpowering on various fronts? Well, we are a forward-looking smart bunch of people.
FIIs long-lost love is back and that has kicked the celebrations for us. But falling oil prices and a promise of better corporate earnings in second half of FY23 gives us the hope that the “worst” is behind us.
Bottom Line: Reminiscing popular quotes by our legendary Rakesh Jhunjhunwala, “We are in the middle of a bull phase which will last for a very, very long time.
These are maybe just temporary aberrations to an otherwise strong growth story. So, aim high but prepare for lows too!
China’s self-inflicted struggles 😭
What happened – Our news feeds have been bombarded with buzzwords like inflation and interest rate hikes happening world over. However, China seems to be treading on a completely different course, albeit nervously! It lowered its lending rate by 0.1%! But why is it taking measures completely opposite to its global counterparts? Recession fears my friend!
Too little, too late? This surprise but a minuscule rate cut was done to provide a much-needed push to the faltering growth. Covid curbs, slow industrial output, poor real estate sales, weak consumer spending, dismal youth employment have all retarded China’s GDP in Q2 to a mere 0.4%. But just 10 basis points to tackle this breadth of challenges?
Bazooka stimulus to follow? Unlikely, It’s a tricky path, you see. China is reeling under ballooning debts and too much stimulus could be deadly. Maybe that’s why this baby step to boost confidence.
Bottom line – A slowdown for China is a worry for many. Ripples already visible with fall in prices of oil, copper, iron ore and other metals. Love it or hate it, but a recession in China could do us more harm than good in the near term. Fingers crossed!
Ready for another IPO Season?💰
What happened – After nearly a lull for past 3 months, primary markets are breathing a new life again. Markets are on a roll and several IPOs have jumped the gun to benefit from this frenzy.. Digit Insurance, Concord Biotech, Dreamfolks Services and Balaji Solutions are some of the upcoming IPOs announced. Not just that, over two dozen new mutual fund schemes were also launched in July.
Should you join the party? Maybe not. This recovery in markets has been pretty short and sharp. Memories of failed IPOs are still quite fresh. Hence, do your research before putting your money in.
Bottomline – Sentiments are still quite feeble. Stability in recovery and sustained FII inflows is essential to see big ticket fund raising hitting the street. Wait and watch rather than hurry and regret.
Ola – Too many promises to keep 🏍
What happened – Like a true nationalist, Ola’s Bhavish Agarwal has effectively used Independence day to announce new plans and products. Last year it was the Ola S1 scooter. This year it was its cheaper variant and also an EV Car! Ambitions seems to run high in his veins!
New products, new hopes – Ola aims to correct (not repeat hopefully) all the mistakes it made last year. Its hyped Ola S1 scooter launch saw a dramatic turn of events. From order backlogs to production delays to safety concerns and huge order cancellations, Ola has come one full circle. A lot is at stake with this cheaper variant to gain back some of the loss.
Shifting gears – Ola aims to launch a E-car by 2024 and sell a million by 2026, hitting competitors like Tata Motors, M&M head to head. Not just that, this car is expected to be the fastest with an acceleration from 0-100 in mere 4 seconds! Going by past records, we digest all of this with a pinch of salt
Bottom line – Ola’s Mission Electric is an ambitious plan on paper. It needs a massive dose of funding to make it a reality. A funding winter has changed the scene quite a lot. But kudos to Mr. B’s never give up spirit!
Zomato: Momentum rules⚡
What happened – After hitting a 52 week low of Rs. 40 on July 27, Zomato share price sky rocketed rallying almost 55% in less than 15 trading sessions. Momentum play at its best or a turnaround unfolding?
What’s the secret?– Till last month all knives were pointing at Mr. Goyal and its loss making venture. But Q1 earnings were a surprise check for all. Zomato not only managed to reduce its losses by almost 50%, it also secured a break-even at the EBITDA level in the food division. Not just that, company’s tone was super positive charting out a more predictable path towards profitability. That did the magic!
Investor interest back – While several private investors exited post the lock-in expiry, several domestic MF houses and foreign portfolio investors lapped on to this positivity. These shareholders own 23% of Zomato now versus 12.6% that they held at the end of June.
Bottom line – Blinkit acquisition is still weighing on the company’s future prospects and the new shareholders will be closely tracking Zomato quarter by quarter. All those who followed Mr. Buffett’s saying – be greedy when others are fearful, and fearful when others are greedy, must have rewarded you handsomely!
Wipro bucks under pressure ✂
What happened – Wipro decided to hold back variable pay to mid and senior executives for Q1 due to pressure on operating margins. Fresh joinees till team leaders to receive 70% of the target variable pay.
The inside crisis: High attrition at 20%+ and huge talent costs have been hitting the IT companies. Wipro’s Q1 operating margin was at 15%, the lowest among all the majors. Recessionary concerns in US and a weakening Rupee have simply added to its woes.
Read across for others: With attrition largely peaking out the focus on employee cost reduction was bound to happen. Others are quite likely to follow suit.
What else made news
🙏R.I.P: A day before the 75th Independence Day, India lost the legendary investor and the most unwavering believer in India’s growth story, Mr. Rakesh Jhunjhunwala
🧐Digging Deep: The Enforcement Directorate is probing a money laundering case at WazirX and froze assets of crypto lender Vauld
🦄New club member: Zomato-backed logistics player Shiprocket became the latest entrant into the famed unicorn club after raising $33 million
🇮🇳Har Ghar Tiranga: The campaign generated Rs. 500 cr biz from sale of 30 cr flags as per traders confederation
💔Cutting ties: 5 Chinese firms plans to delist from US stock exchange amid worsening tensions between the two countries
💸Bet on offline: Online payments gateway Razorpay acquired point of sale (PoS) firm Ezetap for $100 million, 3rd fintech acquisition in 2022
What is Tavaga Tribe upto?
Reading: Start With Why by Simon Senek. This book works on a very simple idea. The Author breaks down not only how to rethink what you do each day in a different light, but more importantly why you do it
Listening: Naan Curry with Sadaf and Archit. If you are a foodie and interested to know our rich heritage then this podcast is a must-listen.
Key insights from our Research Team
R.I.P Rakesh Jhunjhunwala
1960 – Forever
Hope you have a safe and relaxed weekend!
Disclaimer: This write-up is solely for educational purposes. This in no way should be construed as a buy/sell recommendation. Please consult your investment advisor before investing.
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