Weekly Wrap Up

Market Buzz this week

Today we are covering: Catch me if you can, UPI 2.0, Adani’s overflowing cap, and much more.
This week has been difficult for the Indian markets, rate hikes, oil prices surpassing $120, backlash from Gulf, and slow macro indicators. Waiting for a watershed moment, literally!

Have feedback? Let us know at support@tavaga.com

Catch me if you can

Got what was expected – 50 bps hike is now a reality, already discounted by the markets. CPI persistently above the RBI’s comfort level. While FY23 GDP growth forecast retained at 7.2%, inflation forecast was revised up significantly by a full % to 6.7% for FY23. Clearly, the beast has been recognized
What now? Will be followed by further hikes of about 80-100 bps in future before inflation starts cooling down. No surprises there. In this fight, growth is bound to suffer in the short run, as inflation is a bigger enemy than rate hikes.
Can RBI catch up? Doubtful! ~53% of India’s CPI basket is formed by food & energy. Energy further feeds into other segments like transport. Governor admitted 3/4th rise in inflation forecast is due to war-led rise in energy/food prices. If current inflation is being driven by factors outside monetary control, how will then a rate hike solve it? It can just control demand and general economic activity.
But do we really have excess demand due to high banking liquidity?
Pvt consumption failed to pick up so far, Rural demand also in distress. We might actually need more of consumption and investment to see any substantial increase from pre-pandemic levels. Now, even if demand contraction is the only way out, will the hike control the beast?
FYI, current banking credit growth at 12.1% is much below the FY22 nominal GDP growth of 19.5%. Credit growth might prolly have to be higher to support higher working capital requirements (given inflation), and much-needed higher investments.
So how then the rate hikes be of any use? It could only lead to high long-term bond yields (7.5% this week) improving real rates for savers and achieve overall financial stability.
Bottomline –Looks like growth estimates have a higher likelihood of being hit downwards than inflation.

UPI 2.0

What happened – RBI announced credit card-UPI linkage, opening up another crucial avenue for the most widely used payments platform. This may soon kick off seamless credit issuance without even having to carry the plastic. Once you link the credit cards, all that users have to do is scan the QR code and choose the CC as the payment mode.
Change from? – Currently, UPI allows customers to link their savings or current A/cs, or debit cards to the interface. They can now link RuPay credit cards to UPI, to start with, and others like Visa and Mastercard are expected to follow.
Benefit for the small biz: No need for expensive POS machines (used for card swiping)
Ques left unanswered – Will merchants be charged the merchant discount rate? MDR is a fee charged to small businesses by banks for accepting payments from their customers via credit/debit cards. MDR has been kept 0 for payments through UPI and RuPay debit cards and capped at 0.9% for all other debit cards – Visa/Mastercard. No such cap on MDR for credit cards exists. If MDR is not allowed for credit cards, will they be as receptive to UPI? Will the cost pass on to consumers? Will the merchants be given an option to opt-out of this?
Bottom line – While we await more clarity on the announcement, this move may well pave the way for a second innings of UPI and unlock future possibilities of linking it with mobile wallets, or BNPL too.

Historic feat!

Cancer study: Rectal cancer vanished in all 18 patients who were given Dostarlimab every three weeks for 6 months, according to a study published in the New England Journal of Medicine this week. It is unprecedented that a treatment defeated cancer in every single patient.
What now? The study was small and needs to verify whether it can be called a cure. We can live with it!

Adani’s overflowing cap

Non-stop deals – First Drones, then a kho-kho franchise, medical diagnostics, now wholesale e-commerce. Adani’s M&A officers are super busy over the last 72 hours. The last one is Adani-Flipkart’s strategic wholesale and sourcing tie-up which marks Adani’s foray into wholesale e-commerce. This sector is currently dominated by Amazon, Udaan, and JioMart.
Deal details – Under a revenue sharing agreement, Flipkart will sell a range of Adani’s products. Both the companies already have a warehousing and data centre partnership. Flipkart to benefit from Adani’s supplier and distribution network while Adani Group will benefit from Flipkart’s e-commerce footprint. A win-win!
Flipkart’s Wholesale arm sells bulk products to small retailers, shops, factories for their internal consumption or for resale.
Bottomline – Buzz is that Adani is keen on a super app and this deal is a step closer to that dream!

Another Edtech crowned

New unicorn – Ed-tech firm Physicswallah raised $100 million and is the newest unicorn of this year, 16th startup to enter the unicorn club this year.

Hidden amidst struggle – Edtech has been in news this year for all the wrong reasons. With pandemic concerns ebbing and schools opening, the sector has been marred by several mass layoffs, shutdowns and cost cutting. Physicswallah , though, operating in a highly competitive test prep space may stand out. Bootstrapped so far, quietly growing and prioritizing cash flow early in the race. Most importantly, it has a hybrid-learning model in place. Focus on regional languages apart from English, also gives it an edge in a bigger, untapped market.
Bottom line: Led by a great teacher has brought it this far. Its scale-up journey in an otherwise struggling space will determine the next leg of the story.

CEO sale rocks bazaar

What happened – Policybazaar shares fell 15% earlier this week after CEO Yashish Dahiya planned a stake sale. Mr. Dahiya had 5.5% stake in the insurance co. which has come down to 4.6% post the bulk deal.

Distress abound – Despite reporting a doubling of its Q4 revenue, share price of the company is a massive 64% down from its peak. Tech stocks have anyway been under immense selling pressures amid muted global sentiments. CEO plans might have further spooked the investors.

Bottomline – This sale follows another deal in Feb this year when Alok Bansal, another co-founder of PB Fintech, also sold 2.85 million shares. Founder stake sales when questions around startup profitability gaining ground is bound to raise questions.

What else made news?

Damage control – Govt throwing water after diplomatic fire broke when comments on Islam by BJP ppl sparked outrage in Gulf nations, called for boycott of Indian products
Another Summer virus – India recorded over 7,000 cases this week, daily positivity rate crossed 2%
Boot day: Reliance and Apollo Global Management made a $6.3 billion offer to acquire international arm of British health and beauty retailer Walgreens Boots
Cold-shave: India may restrict refrigerator imports to boost local manufacturing. LG, Samsung and others to be impacted
Painful – Gold loan startup Rupeek lays off 10-15% of workforce amid weak macro conditions and funding crunch
Social media pitfalls – Meesho sent legal notices to some influencers for posting defamatory content against the firm

What Tavaga Tribe has been up to this week?

Reading: How to Fail by Elizabeth Day – this book reveals that failure is not what defines us; rather it is how we respond to it that shapes us as individuals
Listening: Paperback- It engages with experts from various fields, suggesting 5 non-fiction titles that contributed to their journey, to encourage peer-to-peer learning.

Meme of the week

The struggle is real!

Key insights from our Research Team

5 Monsoon Stocks to Watch Out
ELSS ETFs: Passive Investing the New Normal
The Great Indian Real Estate Craze
Various types of savings schemes

Did you like today’s issue? If yes, please spread some love, Share the weekly wrap
Hope you have a safe and cooler weekend!

Cheers,
Ruchi Mehta
Business Analyst

https://www.linkedin.com/in/ruchimehta-tavaga/
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.
Have feedback? Let us know at support@tavaga.com or speak to us:
𝗧𝗮𝘃𝗮𝗴𝗮 𝗶𝘀 𝗮 𝗦𝗘𝗕𝗜 𝗥𝗲𝗴𝗶𝘀𝘁𝗲𝗿𝗲𝗱 𝗜𝗻𝘃𝗲𝘀𝘁𝗺𝗲𝗻𝘁 𝗔𝗱𝘃𝗶𝘀𝗲𝗿.
𝗧𝗮𝘃𝗮𝗴𝗮 𝗶𝘀 𝘁𝗵𝗲 𝗼𝗻𝗲-𝘀𝘁𝗼𝗽 𝘀𝗼𝗹𝘂𝘁𝗶𝗼𝗻 𝗳𝗼𝗿 𝗮𝗹𝗹 𝘆𝗼𝘂𝗿 𝗳𝗶𝗻𝗮𝗻𝗰𝗶𝗮𝗹 𝘄𝗼𝗿𝗿𝗶𝗲𝘀!
𝗕𝗼𝗼𝗸 𝗮𝗻 𝗮𝗽𝗽𝗼𝗶𝗻𝘁𝗺𝗲𝗻𝘁 – 𝗵𝘁𝘁𝗽𝘀://𝗯𝗶𝘁.𝗹𝘆/𝗹𝗲𝗮𝗿𝗻𝗺𝗼𝗿𝗲𝗮𝗼𝘂𝘁𝘁𝗮𝘃𝗮𝗴𝗮 𝗼𝗿 𝗱𝗼𝘄𝗻𝗹𝗼𝗮𝗱 𝘁𝗵𝗲 𝗮𝗽𝗽 𝘁𝗼𝗱𝗮𝘆!

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Tags: Adani Cancer cpi Credit card link Edtech inflation Physicswallah Policybazaar rbi repo rate UPI

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