17th February 2024 – 24th February 2024 | Another week in the markets
| S&P 500 | Nasdaq | VIX | DJIA | Russell 1000 | NYSE |
| 5,088.80 | 15,996.82 | 13.75 | 39,131.53 | 3,329.81 | 17,616.02 |
| 1.66% | 1.40% | -3.44% | 1.30% | 1.64% | 1.19% |
| Nifty 50 | Gold | Silver | Brent crude | USD-INR | EUR-INR |
| 22,212.70 | $2,045.80 | $22.97 | $80.75 | 82.89 | 89.71 |
| 0.78% | 1.01% | -2.13% | -3.39% | -0.15% | -0.26% |
Source: MarketWatch
Hello Saturday,
This week, Japan’s Nikkei benchmark hit a record high after a lag of 34 years, Nvidia bags a $2 trillion valuation riding on record-breaking results and Grasim makes a foray into paints business with Birla Opus.
- Japan’s Nikkei benchmark hit a record high this week after an unbelievable waiting period of 34 years. Unlike the last time, the Japanese market, this time around, is not in the grips of an irrationally bullish sentiment.
- Record-breaking fourth quarter and fiscal year results spurred Nvidia to a $2 trillion valuation. The company, which sped past Alphabet and Amazon in the market cap race last week, now trails behind Microsoft and Apple in market cap.
- Fed minutes highlight unease over cutting rates too soon
- World Economic Forum President believes that India is on track to be a $10 trillion economy and occupy the world’s third largest economy position.
- Grasim enters the paints business with Birla Opus. The company is targeting ₹10,000 crore in revenue in the first three years of its operations.
Taking stock | Jubilant Japan | Nvidia dominance | Fed fears | India’s high note | Grasim’s gameplay | Invest wisely | Another week in the markets
Taking stock
All three major indices notched up gains of at least 1.3% for the week, making it the sixth week of gains out of the eight weeks of 2024 yet. There was nothing but good news in store for long-term investors as the S&P500 and Dow Jones closed at record highs on Thursday, only to deliver another record-breaking session again on Friday. The Dow closed over 39,000 for the first time. Nasdaq closed the week with a gain of 1.4%, while the S&P500 inched up by 1.6%
Jubilant Japan
Imagine waiting for an incredible 34 years for your investments to bear fruit. A decadeslong wait of 34 years ended this week as Japan’s benchmark Nikkei closed at a high of 39,098.68 surpassing the highs last set in December 1989.
Unlike the last time, when the Japanese market was deep in bubble territory, this time around, the new highs of the market are justified by the profits made by Japanese companies.
As per the Wall Street Journal, the 225 companies in the index are projected to earn a profit of $266 billion in the current fiscal year, which is triple the profits reported a decade back. Take, for instance, Toyota which is anticipating a revenue of $30 billion this FY, nearly twice as much as it made in the previous years. Recently, Daikin acquired two major air conditioner system suppliers in the US, and has managed to increase its net profits six-fold in the decade through last year to close to $1.7 billion.
Egging on Japanese companies to deliver such stellar performance is a cheap Yen and activist shareholders, who have been prodding industrial bigwigs to shed non-performing units within their organisations.
The Nikkei, unlike other stock market indices, isn’t adjusted for inflation. Consequently, its rise also reflects a rise in the nominal prices of products and services. Japanese companies have also been cashing on the global inflation wave, hiking the prices of final products and fattening their profit margins.
Nvidia dominance
Nvidia powered its way to a $2 trillion market cap as tech companies can’t seem to get enough of its superior AI chips’ portfolio.
Interestingly, it took Nvidia 24 years to reach the market cap valuation of $1 trillion. Thanks to its GPU chips’ manufacturing muscle, it attained the $2 trillion mark in 8 months.
Nvidia’s lion’s share of the graphic processing units market- an intimidating 90% share- helped it earn record revenues for the fourth quarter and the whole fiscal year. Boosting Nvidia’s climb higher is the fact that there is a fervent demand for its superior GPU chips in the AI industry.
Apparently, companies are not only flashing these chips to lure in AI talent but are also drawing billions in funding from banks by offering the chips as collateral. One can estimate the worth of these chips by the fact that they are delivered to the networking company Cisco by an armoured car.
In its latest earning call, Nvidia reported a stellar set of numbers. The chip manufacturer’s quarterly revenue stood at $22.1 billion, up 22% from the previous quarter and up 265% from a year ago. For the whole fiscal year, revenue was up 126% to $60.9 billion. Net income for the quarter stood at $12,285 million, up 33% QoQ, and up a whopping 769% on a YoY basis.
Source: Google Finance
Fed fears
A perusal of the Federal Reserve’s January 30-31 monetary policy meeting shows that most Fed officials were concerned with cutting interest rates too soon and allowing inflation to deepen in the economy. Contrastingly, only two Fed officials spoke about the risks associated with holding interest rates high for too long.
In the last two years, the Federal Reserve, to counter inflation that jumped to a 40-year high, has resorted to increasing the benchmark federal funds rate to the range of 5.25% and 5.5%, The currently prevailing rate stands at a 22-year high.
In a recent and rare news interview last week, Federal Reserve Chair Jerome Powell said that Fed officials were not likely to mull over cutting rates in the coming monetary policy meeting slated on March 19-20.
Recent economic data has only worked to underscore the scepticism on rate cuts voiced by Chair Powell. The most recent edition of employment data released by the US labour department indicated that the economy had added twice as many jobs compared to what the economists had anticipated.
In January, consumer prices rose by 3.1% compared to the December reading of 3.4%. While sequentially, the inflation numbers have come down, they are still running hotter than the anticipated reading of 2.9%.
In December last year, during the time of the Federal Reserve’s monetary policy committee, markets were pencilling in three rate cuts in the year.
India’s high note
The World Economic Forum, no less, is bullish about India’s future.
WEF’s President Borge Brende said that India is on track to becoming a $10 trillion economy in the years ahead. He also said that the Indian economy is set to become the third-largest economy in the world given that it is a place teeming with optimism in an increasingly fragmented and polarised world.
“When you come to India, you feel some optimism which is not the case all over the world. We are facing a geopolitical recession, a very fragmented and polarised world, but still there are areas where we can collaborate and it is important to find those areas,” he told the Press Trust of India.
Brende also emphasised that India’s economic trajectory is continuing very well, and that the country is very well placed vis-a-vis the two largest economies of the US and China. He also pointed out that there has been an impressive increase in the FDI inflows to India, which earlier used to be funnelled to other emerging economies.
Brende also praised India’s digital competitiveness marking out that India’s digital trade is accelerating faster compared to the rate at which traditional trade is growing in other parts of the world.
Grasim’s gameplay
Aditya Birla Group Chairman Kumar Mangalam Birla announced the entry of the conglomerate into the decorative paints business under the brand name of ‘Birla Opus’. The brand, which will fall under the aegis of Grasim Industries, aims to pull in revenues of over ₹10,000 crore in the first three years.
Currently, there are three Birla Opus plants operational at Panipat (Haryana), Ludhiana (Punjab) and Cheyyar (Tamil Nadu). In his address, Chairman Kumar Mangalam Birla pointed out that the products will be available to customers in the three states as of March 2024. The company is aiming to provide decorative paints in cities with a population of over 1 lakh by July 2024.
By FY25, Grasim will additionally be setting up three more plants at Chamrajanagar in Karnataka, Mahad in Maharashtra and Kharagpur in West Bengal. The company is looking to expand distribution to over 6,000 towns by the end of the fiscal year.
At its launch event, the company invited over 1 lakh paint dealers across India to “participate in this industry revolution and transform the customer experience”
Investment banker Jefferies has a buy rating on the Grasim stock with a target price of ₹2,300 per share. The firm noted in its report that Grasim was positioning itself aggressively in the segment as nearly 60% of its planned capex of ₹10,000 crore was invested in the paints business. Jefferies also pointed out that Grasim is targeting the position of the second-largest player in India.
Invest wisely
Nvidia’s overwhelming dominance and AI relevance were understood by only a select few in the markets. To assess what will command the highest valuation in the coming years, one needs to know the pulse of the markets while simultaneously keeping an eye on the evolving contours of technology and its changing equation with society. This is not possible without deep research and a near-encyclopaedic grip on financial market movements. With the Appreciate app, incisive research and deep-dive reports into market developments are accessible to you at the click of a button! Now, you can use our research prowess to invest in the US markets and build prosperity and abundance in the long run.
Warm regards,
Another week
in the markets
