“Opportunity arises when the gap between reality and perception becomes significant.” ~ Francois Rochon
The earnings season continues to chug along without any nasty surprises, and at its this point few are talking about interest rates or inflation. And yet, while hopes are about an impending reduction in interest rates, they are rising at the moment, even if in small doses. So far this week alone, HDFC Bank, IDFC First and Bajaj Finance have raise lending rates by 15-40 basis across tenures.
Adani Enterprises
The stock is likely to see a bump up today after the company late last evening said that it is looking to raise funds, with share sales being one of the options. Sentiment for the stock has improved after Rajiv Jain’s GQG Partners picked up a stake in the company in March this year. Should the company go in for the QIP route, a meaningful upside in the stock will depend on the profile of investors that the company is able to rope in. The company needs funds and lots of it, and every fund raise will be welcomed by the market, but it is the colour of the money that will decide the excitement level among investors.
Aarti Industries
The stock had been a laggard in the chemicals space for a while now, and the gloomy commentary by the management seems to vindicate what a section of analysts had been fearing. Question is: if the stock is closer to its bottom now that the bad news is out in the open. Renewed competition from Chinese producers in certain segments like agrochemicals could be an added challenge for the company, besides slowing demand in key markets and products, according to Kotak Institutional Equities.
Lupin
The stock held ground in Tuesday’s choppy session on strong trading volumes. Having missed the April deadline, the management is now working towards a possible August launch for its anti-asthma inhaler Spiriva. MD Nilesh Gupta had guided for operating margins “north of 15 percent” in FY24, while his CFO Ramesh Swaminathan says it could be as high as 18 percent. Better profit margins, low price erosion in US, Spiriva launch and no more FDA bad news would be the perfect cocktail that Lupin bulls are betting on
Blue Star
The stock has been witnessing higher than usual volumes over the last couple of weeks even as the stock price has been coming off. The company’s boss B Thiagarajan said April sales were lower compared to same period last year, but the trend now is of AC sales peaking in May instead of April. He expects Blue Star to grow more than the 20 percent the industry is expected to log this year. The company’s commentary over the last few quarters has been consistently bullish, and investors appear to be buying the story. The stock has risen 63 percent from the lows of July.
Property woes
Defaults are rising for the collateralized loan obligations (CLO) market, a niche mortgage bond used primarily to fund apartment-building purchases, in more signs of rising interest rates roiling the property sector, reports Wall Street Journal. Rising interest rates, a softening rental market and rising expenses mean many landlords no longer earn enough money to pay back their loans, the report said.
“Rental apartments accounted for two-thirds of CLOs issued in 2021 and 81% of those issued in 2022, according to real-estate data firm Trepp. Nearly $88 billion in securitized mortgages are at risk of default, and 42% of them are backed by apartment buildings, Trepp estimates.”
Dr Copper
The global copper market is likely to face a deficit of 114,000 tonnes this year, according to the International Copper Study Group (ICSG). The body had in October last year forecasted that the market would be in surplus of 155,000 tonnes in 2023. Two factors have led to change in estimates—higher than expected usage in China and lower than expected growth in mine production. Despite the sluggishness in China’s economy and recession fears in the US and Europe, ICSG expects manufacturing activity to continue rising in most of the key copper end-use sectors.
AI craze
China’s craze for artificial-intelligence companies has sparked off frenzied buying in shares of some of the nation’s little-known publishers. The China Publishing & Media stock has trebled in value so far in 2023, and three similar firms are among the top 10 best performers on the Shanghai bourse since the start of April. In Shenzen, three other publishing firms rank among the top 5.
From Bloomberg:
“Copyright properties will be more prominent given the overall regulatory trend,” especially as large AI model training in China still requires a lot of data, Founder Securities said in a research note published Tuesday. The broker favors state-backed publishers due to their ownership of critical data and speculation that their government connections will see them benefit from Beijing’s pledge to let state-owned firms have access to more capital and play a greater role.”
Cashing in on Crisis
For all the ghoulish headlines the US banking sector has been generating lately, here’s a revealing statistic: American banks clocked their highest-ever profit of $80 billion in the first quarter of 2023. This was 33 percent higher than the year-ago period, reports FT.
US lenders benefited from rising interest rates, low loan defaults and an expanding job market, despite depositors and investors fretting about their financial decisions. Of the country’s almost 4,400 banks, just 197 — less than 5 percent — posted losses in the quarter, according to BankRegData, a data provider.
Hike pause
Chat GPT may be the rage globally, and Microsoft has emerged as a strong challenger to Google in the artificial intelligence space, but that may not translate into immediate gains for Microsoft employees. The software giant is withholding salary hikes for full-time employees this year, with CEO Satya Nadella citing economic conditions and an investment in artificial intelligence as the main reasons. In an email to staffers, Nadella also signalled that performance bonuses for the year would be down significantly.
Das Auto(cracy)
German auto giant Volkswagen was at the receiving end of investors’ ire at its shareholders’ meeting on May 10. Reason? Because of its controversial plan to build a factory in China’s restive Xinjiang – a focus area for human rights groups. Shareholders, including top-20 investors Deka Investment and Union Investment, have demanded that Volkswagen drop the project, being built in partnership with China’s SAIC Motor.
About ten activists even interrupted Chief Executive Oliver Blume’s speech at the meeting, shouting slogans and waving banners that read: 'End Uyghur Forced Labour'.
(Abhishek Mukherjee contributed to this piece)
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