Market movement this week
| Sensex | 1292.6 | 2.2% |
| Nifty 50 | 400.2 | 2.3% |
| Nifty Midcap | 139.9 | 1.6% |
| Nifty Small-Cap | 535.2 | 1.9% |
Markets this week 📊
Last week was quite a stressful one with a big deja vu feeling – the sense of uncertainty, the panicked wait ahead of the regulators’ intervention—and a situation that is worse than initially imagined. The next casualty could be anytime soon. Aam junta’s confidence is shaken and is steadily withdrawing money. From “Too Big to Fail” to “To Big to Bail”, we have indeed come a long way!
2023 has been a terrible year till now. From its all-time highs last Dec, markets have fallen by ~10%. The drop is even more brutal for smaller stocks. Sectoral damage is visible in real estate, metals, and oil index, losing 20-45% from their all-time highs. Falling oil prices (below $75) is a silver lining but this coming on the back of reduced world demand is not much to cheer about.
All is not gloomy by the way. India made a mark at the Oscars, thanks to RRR’s song Naatu Naatu and the documentary, The Elephant Whisperers. Cashing on this celebration is none other than Netflix. It pivoted and got more desi content to get its India strategy right. As part of its focus on regional content, Netflix grabbed the Hindi version of RRR, which went on to become one of its most-watched titles in 2022 globally. No wonder it has planned a bigger India budget this year.
While you grab your popcorn and chill, let’s give you a heads-up on some of the important news that made the headlines this week.
TCS gets a new leader
Surprise exit! Senior management exits are usually solemn affairs. We often see statements from the company and the one resigning with usual notes of gratitude, invaluable contribution remarks, and of course assurance from the next executive replacing the position. We saw nothing of this on the unexpected exit of TCS’ MD and CEO Rajesh Gopinathan.
Legacy cut short: Mr. Gopinathan still had 13 years to go before he reached retirement age at the company. Just last year, he was reappointed as the CEO for another 5-year term. Given his young age (52 years currently), he was expected to hold the position for a long time, just like his predecessors.
Not all about work: Gopinathan wanted a better work-life balance and not wait till 65 to achieve it. He wants some downtime and relaxation before he decides what to do next. “Not an impulsive decision”, he says.
Gain for some: K. Krithivasan is to take the place of TCS’ next chief. He was heading the important BFSI segment and was the most suited veteran. He has 7 years to go before he retires. Clearly, he would have never got this opportunity had Gopinathan stayed as MD. Good for him!
Our Take
Markets do not like uncertainty. Clearly visible from its reaction – while most IT stocks were in green on Friday when this news came out, TCS was marginally down. This news has come at an albeit testing time for the IT sector amidst recessionary times and a possibility of an IT spending slowdown. But, while it may be a surprise but it is not a setback. Despite the challenging macro environment, TCS remains well-placed and poised to benefit once the market rebounds.
Skeletons still popping from Adani’s closet 👬
Troubles galore: Adani group had a dedicated comeback plan, with its PR team and lawyers in place, and had begun paying off its loans to get some credibility back. But problems do not seem to end for this group, and maybe rightly so.
The cinematic twist: Mr. Adani prepaid its margin-linked, share-backed loans worth $2.15 billion before the March 31 deadline including a $500 million loan taken to acquire Ambuja Cements last year. To cover some of its losses and pay off the debt, Adani group announced plans to sell its 4.5% stake in Ambuja cement for $450 mn. That’s where things get really interesting. Turns out the group does not even own the cement company, as per regulatory filings. The actual owner is a Special Purpose Vehicle (SPV) owned by none other than Mr. Adani’s brother, Vinod Adani, and his wife through multiple offshore entities, as per The Morning Context.
Our Take
Adani Group had categorically denied that Vinod Adani holds a managerial position in any of its listed entities or subsidiaries. This now aligns with Hindenburg Research’s claims. How can Gautam Adani possibly try to sell something that he technically does not own? This raises a big question about the group’s already questionable integrity. It looks like the road to recovery for the Adani group just became a whole lot harder.
WORLD
Case of a rotten apple? 🍎
Ghosts haunting again: Am sure you heard the phrase – “One rotten apple spoils the whole barrel”. Looks like there are far many rotten apples in the banking world today spoiling everyone else. This week grimly reminded us all of the 2008 crisis. The latest casualty after Silver Gate, SVB, and Signature Bank is Credit Suisse now. Share of the Swiss Bank was down close to 30% this week but are down more than 70% from last year. Credit Suisse has had a history of problems. Accused of supporting the mafia, drug dealers, money laundering, party to the Mozambique loan scam, and what not. The final nail in the coffin came when the bank admitted to material weakness in its accounts. Saudi National Bank, its biggest shareholder, announced that it will no longer invest in them.
Scam central: Credit Suisse was involved in 2 major scams – the Arcegos Captial scam and the Greensil Capital scam and lost more than $5.5 bn. It had to shut down its Prime Finance business which catered to these hedge funds. That was the start of its problems as this segment was a huge revenue earner. Its other divisions wealth management (doing okayish) but investment banking is hard hit due to the global funding winter. Even the biggies like JP Morgan and Goldman are in trouble but CS has been squeezed to the max. 2022 saw its revenue decline and losses rise 5x.
Our Take
The Swiss National Bank has offered $54 bn to help CS but the question is – is it enough? Another consortium of 11 US pvt banks, including BoA, Citi, and JPMorgan, would also together pump $30 billion into the First Republic to avoid a repeat of SVB. Such lifelines are unheard of since the 2008 crisis. Banks are on the edge and nervously trying to bail out sinking ships. Fed sure is in a tight spot. To continue or pause the interest rate hikes? That said, mind ya, SVB and CS troubles were a lot of self-inflicted and not due to these rate hikes. We do not know how this saga will unfold but just want to leave you all with one bit of info: Credit Suisse’s current chairman is Axel ‘Lehmann’.
TECH
Chat GPT-4 – the baap of all AI 🔮
Future is here: Late last year we were all left in awe at the launch of Chat GPT and the potential disruptions it can cause. Well, hold your seats and say hi to the baap of Chat-GPT. OpenAI launched GPT4, an image, and text understanding AI model which is the “latest breakthrough by the company. Let’s decode this new tool for our readers, we simply cannot hold our excitement about it.
What is Chat-GPT 4? GPT is Generative Pre-trained Transformer. This means it is a cool program that knows everything that was fed into it during its testing period. Both ChatGPT and GPT-4 were trained till Sept’21 so please do not bother asking them about current affairs, coz unlike Google, they cannot browse the internet and throw results.
So then what the hell can it do?
Can take visual inputs too while its older bro Chat-GPT was merely a chatbot (text only). This means it can use the image of ingredients in your refrigerator and suggest a recipe!
More creative: Can understand your writing style and generate content accordingly.
Smarter: While GPT 3.5 ranked in the bottom 10% in the US law examination, GPT-4 ranked in the top 10%!
More reliable and accurate: You may not be able to get an inappropriate task like creating dangerous malware anymore and is much more factually accurate than Chat-GPT.
Of course, all this will not come for free. As of now, it’s only available to the paying members of ChatGPT plus ($20 per month). Want to try it out without shelling out so much?
Chat-GPT is already integrated with several companies. into their products. Khan Academy is using GPT-4 to help teachers teach better and students learn better. Morgan Stanley is using GPT-4 to support its analysts. Microsoft’s Bing has also integrated GPT-4 but is yet to go live.
Our Take
Artificial Intelligence is here to stay. The pace at which this space has developed is mindblowing. Our learning curve needs to catch up to leverage this technology masterstroke. Google needs to stop being complacent and wake up. With Bing integrating GPT-4, the switch from Google may be faster than thought.
What else made the news?
⚖️ Opened the doors: Bar Council of India will now allow foreign lawyers and firms to practice in India.
🤑 Lenskart scores: The eyewear giant raised $500 mn from the Abu Dhabi Investment Authority at a valuation of $4.5 bn.
🚫 Tik Tok gone? Video creation and streaming platform Tik Tok has been banned from US and UK govt officials’ devices as it affects national security and NZ may follow suit.
📉 Inflation slowdown? India’s retail inflation marginally slowed to 6.4% in Feb compared to 6.5% in Jan, although still above RBI’s tolerance level.
✂️ NCLT Nod: The NCLT approved the merger of HDFC ad HDFC Bank, this was the last pending approval required and the merger should be completed by Q3 of FY24.
💰 Moneypump: PhonePe, ex-Ashneer Grover, raised $200 mn from Walmart at a $12 bn valuation.