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India’s Q3 GDP jumps to 8.4%

24th February 2024 – 01st March 2024 | Another week in the markets

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Source: MarketWatch 

Hello Saturday,

This week, China’s manufacturing activity suffered a decline signalling limited success of the government in reviving a faltering economy, Indian markets rose higher on solid Q3 GDP numbers and Adani Energy is reportedly planning to raise $400-$500 million via a bond issue

  • China’s manufacturing activity contracted for the fifth consecutive month in February underscoring the failure of the Chinese government’s initiatives to revive a slowing economy.
  • Vanguard CEO Tim Buckley — under whose tenure the assets of the firm expanded over 80% to $9 trillion — is set to retire by the year-end.
  • Q3 GDP figures send Nifty and Sensex soaring higher.
  • Google is likely to boot out apps by 10 Indian companies from its platform on account of disagreements over service fee payments. Reportedly, Google has issued notices to and Info Edge.
  • Adani Energy is looking to raise $400-$500 million via a bond issue. Reportedly, the issue could be out in a quarter.

Taking stock | China’s conundrums | Buckley bids adieu | Adani aspirations | Google’s gameplan | Economic growth powers equities | Invest wisely | Another week in the markets

Taking stock

All three major indices started March on a positive note marking four consecutive monthly leapfrogs in the benchmarks. Dow Jones closed the day by rising 91 points or 0.2%, whereas S&P500 inched up by 0.8%. Nasdaq Composite led the three in growth and finished higher by 1.1%. It also set a record-breaking high.

China’s conundrums

The Chinese economy has been going through a rough patch, for the past few quarters. Adding to the woes of the Chinese government are the new figures from an official manufacturing gauge, which indicates that manufacturing capacity in China contracted for the fifth month in a row in February. 

Data released by the National Bureau of Statistics on Friday showed that China’s industrial activity edged down from 49.2 to 49.1. A reading below the level of 50 indicates a contraction in overall manufacturing activity, whereas a reading over 50 signals expansion.

This reading is all the more important considering that it is coming in the run-up to the annual legislative meetings slated for the coming week. Commentators and China experts have been building in expectations of bold policy initiatives by the Communist Party leadership.

Meanwhile, economists have been spotlighting the recurrent failures of the government in propping up the economy. Chinese banks recently slashed an important lending benchmark in hopes of re-energising an economy battling deflation, declining exports and a morose real-estate market.

The dismal industrial production figures would be in focus as leaders from across the nation meet to find a resolution to persistent structural problems like debt-fuelled capacity building and the disillusionment in the realty segment. The real estate sector has been in the doldrums for the longest time in China since the emergence of the Evergrande crisis.

In 2023, China recorded one of the slowest economic growth rates — 5.2% — in the past few decades, discounting the Covid-wracked years. Troubles never come singly, and such is the case with China’s economy which is currently beleaguered with a host of issues ranging from ratcheting government borrowings, reluctance of foreign companies to invest and a sudden tanking of discretionary consumption.

Buckley bids adieu 

After delivering a phenomenal performance for the last six years, Vanguard CEO Tim Buckley has decided to hang his boots. 

Under his leadership, the assets of the low-cost fund-managing firm grew by a whopping 80% to $9 trillion. As per a company announcement, Buckley will retire by the year-end. 

Meanwhile, Greg Davis, who held the position of the Chief Investment Officer of Vanguard will now operate as the President. The firm said that it is currently running a selection exercise for the next CEO.

Currently, Vanguard occupies the position of the second-largest firm in the world, second only to BlackRock. 

Buckey is often credited for steering the company to safe shores and away from the thorny issue of the wilful handling of shareholder votes by asset managers. Buckley also had the foresight to distance his company from ESG investing. Reportedly, Buckley told journalists that as per Vanguard research, ESG investing did not have any clear advantage over broad-based investing.

Under Buckley’s helmship, Vanguard continued with its middle-of-the-road investment approach. The company famously refused to launch a Bitcoin ETF — a product that has been unveiled by many of its competitors — insisting that the cryptocurrency was ‘more of a speculation than an investment’.

Adani aspirations

Reportedly, Adani Energy is exploring options of raising $400-$500 million via private placement of bonds. 

Media reports indicate that the company is in talks with US institutional investors, especially, US insurance and pension companies to raise the said funds.

The bond issuance will be in the avatar of Regulation-D notes which will offer infrastructural assets as collateral. Technically speaking, Regulation D is a provision that exempts a select few companies from complying with registration norms before raising funds by offering public securities.

Bonds issued by the Adani group companies have regained their health and are being traded at levels seen before the Hindenburg report came out in January last year. The Adani group was forced to retreat from foreign currency bond markets, in the aftermath of the wreckage unleashed by the Hindenburg report. The group, in a bid to, reassure investors of its viability and financial health, bought back $315 million of listed overseas debt securities. 

Adani Green Energy

Source: Google Finance

Google’s gameplan

Alphabet-owned Google on Friday said that 10 Indian companies had not paid the charges that are levied on developers for selling digital goods on its Play Store. 

While Google has not named the 10 companies, it has accused them of creating an “uneven playing field across the ecosystem” by not paying for the “immense value” they received on Google Play.

Google further asserted that a Supreme Court decision in its favour gave it the right to levy fees on developers, adding for good effect that the apex court had refused to interfere with its prerogative to charge a fee on its app store. Google has threatened that it will take all necessary steps to ensure compliance from these companies, including the removal of these non-compliant apps from its store.

Currently, Google levies a service fee when developers sell in-app virtual goods. As per the company, only 3% of the developers in India sell digital goods via their apps, and consequently have to pay a service fee. Google claims that even within this cohort, a vast majority of the companies pay 15% fees or less.

The company claims that less than 60 developers in India are subjected to fees above 15%. 

Shares of and Info Edge both took a sizable beating once the news broke. 

Sanjeev Bhikchandani, founder of Info Edge, a company that operates the popular Jeevansathi matrimony portal told Mint that the portal has been compliant since February 9 and that the company has paid all invoices. He added that his company is in touch with Google, and will reply to the notice emphasising that they have been compliant. 

Economic growth powers equities

Benchmark equity indices closed at record highs as solid Q3 October-December GDP figures rekindled investment fervour among retail and institutional investors alike. Markets witnessed purchases for all corners of the market.

Banks, oil and gas as well as capital goods pushed Nifty to a record-breaking 22,353.30 points and Sensex to 73,819.21 on the last day of the week. While DIIs purchased equities worth ₹3,814.53 crore, proprietary traders built up new positions running into ₹618.58 crore. Meanwhile, FIIs also purchased shares worth ₹128.94 crore.

The GDP growth rate for the December quarter stood at 8.4%, far ahead of the market estimate of 6.6%. The number is also two times higher than the 4.3% growth rate set in the third quarter of FY23. The statistics ministry injected more energy into the markets by revising the annual GDP growth rate to 7.6% from the earlier 7.3% estimate.

Reliance Industries, Tata Motors and Adani Ports welcomed fresh lifetime highs on Friday.

Invest wisely 

Markets across the globe– India, the US and Japan – have been climbing to greater heights, week after glorious week. It is now — more than ever before — important that we channel our hard-earned funds into blue-chip and high-performing stocks whose businesses can weather market volatility and economic disruptions. This is where a guide like the Appreciate app can come in truly handy. Day after day, we help our customers build wealth and prosperity for the long run while forewarning them about changing market cycles, and adverse economic downturns.

Warm regards,
Another week
in the markets

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