Markets this week 📊
The Union Budget was supposed to be the highlight of this week. While it did bring in some much-needed cheer and relief, the Adani saga showed no signs of abating and ruled the markets.
Adani’s FPO was subscribed and then recalled, causing wild swings in the conglomerate’s stock price. What struck was a rare occurrence this week when on Thursday BSE Sensex closed in green, while Nifty closed in the red. That’s because none of Adani’s stocks are part of the 30-share BSE index while NSE’s Nifty which has both Adani Enterprises and Adani Ports among its constituents was hammered sharply. Btw, NSE has put the Adani group stocks under additional surveillance.
If your portfolio is also affected by this volatility, we would be happy to help. Book a call now and get your finances back on track.
Let’s now dig deep into some of the important news that made headlines this week
The common man’s budget💰
Budget 2023 came as a pleasant surprise and much-needed relief to the common man, being an “all checkboxes ticked” budget. It focused on growth and fiscal consolidation while helping alleviate the tensions of the common man, to an extent.
Agri focus or not?:
The usual focus on food security and education and health outlay continued. Prima facie the budget seemed to be pro-farmers to woo an important voter class. From an agriculture accelerator fund to increase in agricultural credit to ₹20 lakh crore and other outlays for fisheries, animal husbandry, and dairy. But a shocking decreased allocation under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and no change in outlays for price support for farmers painted a completely different story.
Aam aadmi happy:
Several announcements like a one-time small savings scheme for women, doubling the maximum deposit limit under the Senior Citizen Savings Scheme (SCSS), increasing Monthly Income Account scheme as well as increasing rebates in the new income tax regime. All of this pointed to one thing this generosity is majorly attributed to woo the burgeoning middle class and also to fix the larger problem of uplifting domestic growth from the pandemic clutches.
The government may have to forego a good chunk of money (Rs. 37k crore) for this generosity in the hope that the consumption dynamic plays out. Amidst global headwinds, India has a gloomy export outlook coupled with private infra yet to gain momentum. Mr. Modi may only have the consumption story trump card to meet the 6.5% GDP projection made by the Economic Survey. An overall pragmatic budget with probably best use of resources in the current situation.
Reality strikes Gautambhai’s paradise
Politically correct: Despite the Adani FPO being fully subscribed the bad times don’t seem to end. Adani announced on Thursday that the FPO has been recalled and the money will be returned to investors, explaining that it was “morally incorrect” to proceed with the FPO in such volatile markets. Once Asia’s richest man is now in the hole. The mighty Adani Enterprises lost over $108 b in a matter of 10 days. It’s safe or rather unsafe to say investor faith is thoroughly shaken.
Zero Street Cred: Credit Suisse and Citi Group announced that they will assign zero lending value to bonds of the Adani Group and will not be accepting them for collateral as loans. The funny part is that this comes less than a week after the Swiss major gave an outperform rating to shares from the conglomerate.
Word on Dalal St: RBI finally seems to have woken up from its slumber and has asked banks to give detailed reports of their exposure to the Adani “family business”. It’s no secret that bankers like BNP, Morgan Stanley and India’s fav LIC have backed Adani and the opposition has taken every chance to challenge our PM, Gautambhai’s bestie, taking digs and calling for passport cancellations for India’s top 1% to prevent another Nirav Modi, Mallya situation.
Adani Group seems to be rolling down a slippery slope with no handle on the brakes. Paying off loans early and other gimmicks will not overturn his tarnished image soon. FPO was anyway a “managed situation” and if we talk about moral grounds, then this FPO should not have taken place at all! Unfortunately, this whole episode raises serious questions on the corporate governance and due diligence standards of Indian firms.
Zuck gets back the buck 🪙
Mixed signals in the market: Fed announced a smaller rate hike of 25 bps on expected lines but what came as totally unexpected were the results of the gigantic tech. Apple, Amazon, and Alphabet posted disappointing results, while Meta got the market love back. Nasdaq rallied 3.3% after Meta managed to break the gloomy spell that the big Tech was under. Meta bounded up soaring 20% while Apple slipped 4%, missing its profit target for the first time in 7 years.
Year of efficiency: Meta reported the milestone user growth with a daily user management base crossing the 2 billion mark and credited its AI discovery engine and reels as major drivers. It laid out plans for 2023 making it a “year of efficiency”. Costs did balloon by 23% in 2022 but the layoffs to compensate for it. Investors handsomely rewarded the tech by adding $93 billion to its market cap, after a rout in Q3. Market also loved the $40bn stock buyback that it announced instead of poured that money in the metaverse black pit.
Problems of the A-team: While Meta posted phenomenal results the other big boys seem to be still under the weather. Apple blamed China’s lockdowns that upended its iPhone production costing the company $4 bn in sales. Amazon reported a 20% jump in revenue from its AWS web services arm but missed the 40% target due to client’s budget cuts as the pandemic boom slowed, cutting 18k jobs to restructure. Alphabet had trouble retaining its ad sales and cried wolf with high costs after firing 6% of its global workforce. Google’s parent company was also hit with lawsuits for misusing its dominance in the digital ad space.
While Meta seems to have broken the pattern this year, it is to be noted that they added to their operating losses with their increasing costs for Metaverse. While one did okay, the majority of the other big tech stocks are still stuck in the slump and the chances of a rebound look slim considering ballooning costs, increasing competition from platforms like TikTok, and greater data privacy and control concerns.
All that glitters is in fact gold🤑
Gold prices touched all-time highs at ₹59,500 per 10gm. Since the beginning of 2022, gold prices have gone up by ~20%! Gold was the best-performing asset class last year beating other asset classes like equities and debt by a long shot.
Why the rush?
US dollar rates hit a 9-month low as the Fed hiked interest rates by another 25 bps, causing the price of gold to rally in the domestic and international markets. On the domestic front, capital gains tax has been exempt from the conversion of physical gold into electronic receipts (EGR), boosting the financialization of gold.
To buy or not to buy?
Considered to be a safe haven as it rises when everything else comes crashing. Historically gold returns have averaged around 9% for Indian investors, while in the last 5 years, gold prices have doubled delivering CAGR returns of 14.5%. A peculiar thing about gold is that it can lie low for long periods and then compensate through spectacular results.
Gold is a must have in the portfolio to maintain balance and enjoy diversification benefits. Not the jewellery but in the form of ETFs or Sovereign issues. Best to reach out to experts who can determine how much of this yellow metal is ideal based on risk profile and financial goals. Still curious, read about it here
What else made the news?
💸ChatGPT monetizes: After an overwhelming response to its launch, ChatGPT announced its subscription plan starting at $20 per month.
📉More and more Layoffs: Byjus cut another 1500 jobs this month, after its round of layoffs in November where it cut off 2.5k.
🥇 2: Thats the number of months it took for OpenAI’s ChatGPT to reach 100 million monthly active users, making it the “fastest growing consumer application in history
🙌Hits a six: US oil major Exxon Mobil gave a smashing Q4 performance with an annual profit of $55 billion for 2022.
💸Love for digital: Reliance Retail partnered with 2 banks and a fintech to start accepting India’s CBDC or e-Rupee in its stores.
💪Hero of the road: Mahindra Auto sold almost 33k SUVs this month, 66% up since its excellent display at the Auto Expo.
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