29th March 2024 – 05th April 2024 | Another week in the markets
| S&P 500 | Nasdaq | VIX | DJIA | Russell 1000 | NYSE |
| 5,204.34 | 16,248.52 | 16.03 | 38,904.04 | 2,853.33 | 18,122.26 |
| -0.95% | -0.80% | 23.21% | -2.27% | -0.99% | -1.04% |
| Nifty 50 | Gold | Silver | Brent crude | USD-INR | EUR-INR |
| 22,513.70 | $2,349.10 | $27.60 | $90.86 | 83.33 | 90.29 |
| 0.84% | 4.18% | 9.96% | 4.44% | -0.02% | -0.36% |
Source: MarketWatch
Hello Saturday,
This week, Federal Reserve Chair Jerome Powell sticks to his guns, says the Fed still has room to cut rates this year, Johnson & Johnson buys Shockwave Medical in a $13.1 billion deal and small-cap funds’ AUM close the gap with large-cap funds’ AUM.
- Fed Chair Powell reiterated his stand — this week — that rate cuts could be in the offing this year.
- Johnson & Johnson buys out Shockwave Medical in a $13.1 billion deal, which will help the healthcare giant strengthen its position in heart care devices segment.
- Apple hands out the pink slip to 614 employees after shelving a decadeslong plan of building a self-driving electric car.
- Marico’s stock trends up after the company spells out expectations of single-digit revenue growth and expansion in operating profit
- Small-cap funds’ AUM grow in size vis-a-vis large-cap funds’ AUM. The gap between the two camps tumbled to ₹45,000 crore in February 2024.
Taking stock | Chair Powell sticks to his guns | Leading from the heart | RIP Apple cars | Marico marches on | Small or large? | Invest wisely | Another week in the markets
Taking stock
Strong jobs data triggered a market rally in all three major indices capping gains on what was a tumultuous week. The S&P 500 moved up by 1.1%, the Nasdaq Composite scaled up by 1.2% and the Dow Jones sprinted 307 points, or by 0,8%.
Chair Powell sticks to his guns
Hotter-than-anticipated inflation figures for January and February have failed to persuade Federal Reserve Chairman Jerome Powell that the desired soft-landing might be a far more difficult feat to establish than it currently appears to be.
It does not help that the new jobs added for February stood at 275,000, a blockbuster number compared to the economists’ expectations of 198,000. However, going beyond the headline numbers, more relief was in store for Chair Powell as unemployment numbers ticked up to 3.9%, while wage growth took a beating as well.
Speaking at a conference in Stanford, California, Chair Powell pointed out that the recent inflation and jobs data does not “materially change the overall picture which continues to be of one of solid growth, a strong but rebalancing labour market, and inflation moving down to 2% on a sometimes bumpy path.”
Economists and analysts have indicated that strong hiring and robust growth are symptomatic of the fact that the monetary policy is not adequately restrictive. However, Chair Powell has argued that improving hiring data and strong economic growth could be on the back of healing supply chains, which had also contributed to an increase in the total number of jobs.
The Federal Reserve has held its benchmark short-term rate in the 5.25%-5.5% range, the highest the benchmark has surged to in the last 23 years. The US central bank ratcheted up the interest rates to such unusually high levels after inflation hit a 40-year high in mid-2022.
Leading from the heart
Healthcare giant Johnson & Johnson bought Shockwave Medicals in a $13.1 billion deal that will help the former strengthen its position in the heart devices segment. The company on Friday said that it would pay $335 a share in cash to Shockwave, which is a premium of 4.7% to the Thursday closing price of $319.99.
J&J, which is based out of New Brunswick, said that it will be financing the deal via cash and debt. The deal has an underlying equity value of $12.5 billion, which has been determined based on the total share outstanding disclosed by Shockwave.
Shockwave is in the business of manufacturing devices that produce acoustic-energy waves via catheters that target calcium build-ups in the arteries of people with cardiovascular disorders. This technique, which has also been used for the treatment of kidney stones, can dramatically make it more convenient to ease the implantation of artery-opening stents.
Shockwave makes for a good buy for J&J. Founded in 2009, the company has treated about 400,000 patients in 70 countries, and bagged nearly 50% revenue growth last year, to $730 million.
“Shockwave really knocked it out of the park and has created a best-in-class company,” J&J Chief Executive Joaquin Duato said.
J&J has been on a shopping spree in the past few years, and it has been bulking up its Medtech segment. In late 2022, the giant purchased heart device maker Abiomed and followed that with the acquisition of Laminar last year for $400 million, the Wall Street Journal reported.
Source: Google Finance
RIP Apple cars
Apple handed out pink slips to 614 employees on the heels of the company’s resolution to shelve a decadeslong project, targetting production of Apple electric vehicles.
The recent layoffs mark the largest firing exercise the company has pushed through since the Covid-19 pandemic. Workers across eight offices in Santa Clara are being let go. The termination of their employment status will come into effect from May 27.
Earlier, the Wall Street Journal had reported that Apple was canning its EV car project to shift more focus onto generative intelligence initiatives, which have witnessed a ramp-up in investments recently. The iPhone manufacturer has already incurred spending running in billions of dollars towards building a completely autonomous, self-driving car. However, Apple subsequently scaled down the project to build a semi-autonomous car.
It isn’t just Apple that has been handing out the pink slips. Layoffs in the tech space in the US have been near-ubiquitous as other companies like Amazon, Zoom, Google, DocusSign have all been terminating the employment of resources, to channel more funds into artificial intelligence operations.
In the last quarter of FY23, Apple managed to beat expectations by delivering higher sales powered by elevated holiday spending. The quarter helped the company end one of the worst earning slumps to hit the company in more than 20 years.
Marico marches on
Marico’s tough luck might be coming to an end.
After logging in a fall in revenue for the last three quarters, Marico said it is expecting to turn the corner and report a single-digit revenue growth in the March quarter. More encouragingly, the company added that it expects consolidated revenue growth to trend upward in the coming quarters.
It isn’t just Marico that has had to grapple with falling sales. A slowdown in rural demand has dented the toplines of several top-notch Indian FMCG companies. A cutback in spending in rural areas, coming in the wake of biting inflationary pressures, has meant that people are foregoing spending on discretionary and essential items.
Marico’s optimistic projections for the March and upcoming quarters boosted the share price by 3%, powering Marico to the top of the Nifty FMCG index.
The company also delivered a positive forecast of low double-digit percentage growth in operating profit and a strong expansion in gross margins on an annual basis in the March quarter.
In the December quarter, Marico reported a higher-than-anticipated profit due to declining raw material costs, which helped lessen the damage from the fall in revenue.
Small or large?
Small-cap funds are the flavour of the bull season.
Millions of retail investors strewn across India are pushing small-cap funds’ AUM to unprecedented heights, so much so, that they are now vying with the AUM of large-cap funds.
As per an Economic Times report, the gap between the AUM of small-cap and large-cap funds has shrunk drastically from ₹1.02 lakh crore in April 2023 to ₹45,000 crore in February 2024.
In April of last year, the collective AUM of all large-cap schemes stood at ₹2.44 lakh crore compared to ₹1.42 lakh crore of small-cap funds. By February 2024, small-cap funds had picked up considerable pace, and their AUM stood at ₹2.49 lakh crore vis-a-vis large-cap AUM of ₹3.05 lakh crore.
The AUM includes total inflows as well as capital appreciation in funds. Between April and February, net fund flows to small-cap funds amounted to ₹40,282 crore, while the balance was accounted for by an increase in Net Asset Value (NAV). On the other hand, ₹2,741 crore went out of large-cap schemes as their NAV shot up up in the same period.
Invest wisely
Investments do not operate in a vacuum. Our investments are tailored to help us prepare for emergencies in life and to assist us in meeting our responsibilities confidently and assuredly. Being disturbed by every minor market correction can detract us from our goals and trigger an undesirable panic and fear reaction hurting our financial interests eventually. Only those investors who stay invested for the long term manage to make a fortune in the markets. With the Appreciate app guiding you on your wealth creation journey, being patient and sticking to your convictions is easier than ever before.
Warm regards,
Another week
in the markets
