Stock Market Investment Shot, 16th September 2022

Fitch lowered India’s GDP forecast for FY23 to 7% from its June 2022 estimate of 7.8%. Even FY24 GDP estimates had been pared lower from 7.4% to 6.7%. The downgrade was triggered after Q1FY23 GDP came in lower than estimated at 13.5%. Fitch also believes that RBI would continue to raise rates to 5.9% by December 2022. At the same time, Fitch has also cut global GDP estimates by 50 basis points to 2.4% for 2022 and 1.7% in 2023. UK and Eurozone are expected to get into a recession by the end of year 2022.

Saudi Arabia once again emerged as the second-biggest oil supplier to India after Russia had emerged as a key supplier for 3 months in succession. However, Iraq remained India’s largest oil supplier. Saudi Arabia shipped 863,950 bpd in August 2022 to India compared to 855,950 bpd by Russia. India is second largest buyer of oil from Russia, after China. India has now gone neutral towards Russian oil after they reduced the discounts they were initially offering. UAE and Kazakhstan are other major suppliers of oil
to India.

Byju’s has to pay Rs2,000 crore to Blackstone by 23rd September as part of the $1 billion purchase of Aakash Educational Services. Byju’s has already paid 75% of the Aakash acquisition amount. At the same time, Byju’s plans to raise $500 million to pay the remaining amount in the Aakash deal. For FY21, Byju’s had disappointed the street with record losses of Rs4,588 crore. More than the fund raising, it will be the valuation at which the funds are raised, that will hold the key. Byju’s is expecting valuations of $23 billion.

Ambuja Cements and Eicher Motors crossed the Rs1 trillion market cap during the week. Ambuja Cements has a market cap of Rs1.05-trillion, and the rally in last couple of months was driven by the Adani open offer. However, response to the open offer was quite tepid. Eicher Motors also scaled market cap of Rs1.01 trillion as the stock price touched a new high of Rs3,671 per share. Ambuja Cements rallied 37% in the last one month. Eicher has rallied 14% in the last one month and 60% since the start of calendar 2022.

Ceat was up 10% on Thursday to touch a 4-year high of Rs1,516.15. Healthy business outlook has been a key driver for the stock. In the last 3 months, Ceat rallied 60%. Apart from tyre demand gaining traction, Ceat gained from easing of pandemic led curbs, pent-up demand from OEMs and robust replacement segment. In addition, prices of key raw materials also cooled. Due to the high tariffs imposed by the US and Europe on Chinese imports, Indian tyre demand will be robust. Easing commodity prices are helping.

Legendary investor, Ray Dalio, of Bridgewater Associates expects US markets to plunge 20% if Fed hiked policy rates to 4.5%. US markets are under pressure due to higher than expected consumer inflation at 8.3% for August. Dalio thinks markets are being too sanguine about inflation falling to 2.6%, but that was unlikely to happen in a hurry. The inflation rate could stay significantly above what the Fed wants. Fed has hiked rates by 75 bps twice to take rates to 2.25% to 2.50%. Another 75 bps hike looks likely in
September.

August saw robust buying in Indian bonds by foreign investors under the Fully Accessible Route (FAR). The $529 million that came into Indian bonds in August 2022 was largely driven by hopes of India’s inclusion in the global bond indices. It is expected that once Indian government bonds are added to the JP Morgan Bond Index, it should fuel passive demand of $30 billion. That has fuelled the demand for Indian bonds. However, there are no time lines and any delay in the inclusion could mean a spike in yields once again.

Air India, owned by Tata Sons, laid out grand plans to hike its domestic market share to over 30% in next 5 years. It plans to achieve this through a mix of customer service, technology, reliability and hospitality. The transformation plan, Vihan.AI, literally means the dawn of a new era. It plans to increase its domestic market share from the current 8% to 30% and this excludes the share of Vistara and Air Asia. There is also a massive fleet revamp at work with the Tatas having earmarked Rs15,000 crore for this
transformation.