Moneycontrol Pro Panorama | Robinhood missed the mark on a bumper listing

A tepid welcome was not surprising as Robinhood’s shares were eventually offered at the bottom end of the $38-42 price range. Whether it was concern on whether its performance could sustain, or something to do with recent regulatory scrutiny or the company’s decision to allocate a large chunk of shares to retail investors that led to the decline is not clear.

Robinhood’s listing also opens it to criticism that while it set out to democratise finance, its own shareholding structure does not follow the golden one share-one vote rule, as an article in the Financial Times says. The founders retain control that is disproportionate to their holding. Read to know why some investors could be put off by this structure (free to read for Moneycontrol Pro subscribers).

This does not prevent Robinhood’s shares from doing well later, but its listing performance could be a cautionary tale for domestic investors to not get carried away by the euphoria around IPOs.

Another thing they should be keeping their eyes on, if they track the macro environment, is next week’s RBI’s Monetary Policy Committee meeting. It is coming close on the heels of this week’s US Federal Reserve, where they noted the improvement in the economy and hinted at a taper. We wrote about that in yesterday’s newsletter and if you missed it, you can read our analysis here.

The IMF’s downward revision of its forecast for India’s GDP growth may seem like one number in the data mix. But in today’s Chart of the Day we make a case for why it’s best to ignore its forecasts, as they are frequently changed and “…for 2020-21 and 2021-22, the projections have been all over the place”. But uncertainty on the economic front may occupy the MPC’s attention.

While the committee may take note of the recovery that’s visible after the second wave has subsided, it will also take note of risks of slower services sector reopening and slower improvement in demand, according to a DBS note on the policy. The MPC may also take into account elevated inflation and one can “expect the MPC to dial up its FY22 inflation forecast from the present 5.1% y/y”. But DBS expects inflationary pressures to moderate in the rest of 2021.

The DBS note says: “The RBI MPC is unlikely to rock the (policy) boat in August, opting to keep the repo rate at 4 percent and the policy corridor unchanged. Forward guidance will favour a continuation of the accommodative policy stance to guard against growth risks, especially the third wave.” A third wave is a risk as the vaccination programme has not picked up speed, as can be seen from our recent update to the Herd Immunity Tracker. At the current run-rate, it will take 11 more months to fully vaccinate the country’s adult population.

All this may see the MPC decide to maintain status quo. For equity markets that will mean it should largely be a non-event, unless the MPC has a surprise up its sleeve.

Investing insights from our research team:

Colgate Palmolive (India): Steady growth backed by higher investment in brands

TVS Motors: Demand coming back; long-term outlook positive

Weekly Tactical Pick -- Rupa & Company

Dalmia Bharat -- Ambitious growth plan matched by premium valuation

Tech Mahindra – A great growth story available at a discount

Mahanagar Gas: Limited growth drivers; wait for fresh entry

ABB India: Strong recovery captured in the valuation

What else are we reading today?

Are Indian start-ups worthy successors to the IT pioneers of the 80s?

A reality check on India-US partnership

Gold demand picks up, but can it sustain?

Cognizant results indicate strong demand for IT services, fulfilment key challenge

China lays down challenge to the West on crypto (Republished from the FT)

Technical Picks: Sri Kalahasthi Pipes, Mphasis, NMDC and BHEL (These are published every trading day before markets open)

Ravi Ananthanarayanan

Moneycontrol Pro