16th August 2024 – 23rd August 2024 | Another week in the markets
| S&P 500 | Nasdaq | VIX | DJIA | Russell 1000 | NYSE |
| 5,634.61 | 17,877.79 | 15.86 | 41,175.08 | 3,075.36 | 19,093.48 |
| 0.89% | 0.54% | -1.15% | 0.88% | 2.53% | 1.10% |
| Nifty 50 | Gold | Silver | Brent crude | USD-INR | EUR-INR |
| 24,823.15 | $2,548.70 | $29.86 | $78.22 | 83.81 | 93.81 |
| 0.97% | 0.15% | 0.98% | -7.21% | 1.56% | 5.31% |
Source: MarketWatch
Hello Saturday,
This week, Tesla’s head of finance bids goodbye to the company in a wave of high-profile exits, Apple users in the EU will now get to delete native apps like Safari and App Store and a hint of bad times to come surfaces as 40 Indian companies report a 50% drop in net profit.
- The EV car manufacturer Tesla can’t seem to catch a break as the Head of Finance departs extending a series of high-profile exits for the company.
- EU’s digital competition law forces Apple to allow users to delete native apps like Safri and App Store.
- The Union government hints that it is unlikely to issue new tranches of Sovereign Gold Bonds as it is a “complex and expensive instrument”
- High raw material prices and unfavourable base effects contribute to a 50% decline in net profits for 40 companies.
Taking stock | Exasperating exits | Compliance compulsions | Goodbye, Goldilocks | Tough times | Invest wisely | Another week in the markets
Taking stock
Federal Reserve Chair Jerome Powell’s address at Jackson Hole specifying that “the time has come for policy to adjust” was music to the market’s ears, and all three indices rose handsomely. The Dow Jones rose by 1.1%, whereas the Nasdaq and the S&P zipped up by 1.5%.
Exasperating exits!
Tesla is going through a rough patch.
In the latest spell of trouble, Tesla’s Head of Finance operations departed continuing the series of high-profile exits from the company.
After serving an 11-year stint with the company, Tesla Vice President Sreela Venkataraman announced her resignation on LinkedIn, remarking that she would take some time off work after stepping down.
Venkataraman’s exit leaves Laurie Shelby, vice president of environmental, health, safety and security, as the only woman in CEO Elon Musk’s executive team. During Venkataraman’s innings with the company, the EV manufacturer went from strength to strength, its market capitalisation leaping from $4 billion to the peak of $1 trillion in 2021. Currently, its market cap stands at $700 billion.
In the past year, several key executives, including two senior-most executives from Musk’s inner circle, have opted for the exit door. The exits of the two senior executives, namely, the Chief Financial Officer and the Head of the Energy business left a setback given their pivotal role in bolstering Tesla’s vehicle sales and expansion of its global footprint.
Venkatraman’s exit couldn’t have come at a worse time as Tesla is looking to transition its auto manufacturing profile into a brand new mould of artificial intelligence and robotics company. To that end, Musk has been making heavy investments in its “Full-Self Driving” driver assistance, Dojo supercomputer and its robotaxi lineup.
Meanwhile, the stock has taken an 11% beating since the beginning of the year as declining sales, slowing EV demand and increased competition from China cool down investors’ enthusiasm for the automaker.
Compliance compulsions
EU digital competition law seems to have gotten the better of Apple.
The iPhone and iPad maker will now, in compliance with the EU competition law, permit users in the European Union to delete native apps like Safari, the App Store, its camera, photo and messaging tool. Apple, henceforth, won’t be able to run its unquestioned dominance and will have to open up its devices to apps from third-party developers.
The app from third-party developers will also be allowed to replace phone calls and messaging programs. Till now, the company has allowed other third-party apps to replace Safai and other proprietary Apple Pay products. However, software updates to be unveiled later this year will create new screens and special sections that will make the other app more visible to the users.
“These updates come from our ongoing and continuing dialogue with the European Commission about compliance with the Digital Market Act’s requirements in these areas,” the company said in its statement.
The competition law flagged off in March this year aims to bring smaller firms into the digital advertising, online searches and app marketplaces field.
Earlier, in June, the EU had alleged that Apple’s App Store violated the law by preventing developers from directing customers to alternative payment methods. The company was warned that it would have to cough up a fine of 10% of its global revenue if it was found in breach of the competition law.
Goodbye, Goldilocks!
After years of great run, the government is hinting that it is likely to pull the shutters on the Sovereign Gold Bond scheme for investors.
The reason? It is turning out to be a ”complex and expensive instrument”
In the first week of this month, the Reserve Bank of India pegged the redemption price of a SGB scheme (SGB 2016-17 series I- issue date August 5, 2016) at ₹6,938 for 1 gram gold with a 999 purity. This is a whopping 122% higher than the issue price of ₹3,119 in August 2016.
The massive appreciation, notwithstanding, the redemption price was 4.5% lower than the average gold price in the week before the Union Budget presented on July 23. In the Union Budget, the import duty on gold was reduced from 15% to 6%, to ease operations of jewellers and to tamp down on gold smuggling.
Through the years, the government has progressively been reducing the amount of issuances under the SGB scheme. The issuance in FY25 at ₹18,500 crore is 38% less than the ₹29,638 crore issuances projected in the February Interim Budget.
The SGB scheme was launched in 2015 with the hopes that it will reduce imports of physical gold, and simultaneously assist the government in managing the fiscal deficit. The bonds offered an interest rate of 2.5%, much lower than the 6.5% and 6.9% yields available on treasury instruments.
Tough times!
In the first quarter of FY25, India Inc experienced a profit squeeze that saw its margin shrink by 3.1%, thanks to an unfavourable base effect and high raw material prices. Leading this decline are 40 companies whose net profit declined by a biting 50% or more on a year-on-year basis.
Within the bucket of companies with a market capitalisation of at least ₹5,000 crore, 40 companies reported a 50% drop in their net profit in Q1.
Allcargo Logistics, for instance, reported a 96% drop in net profit from ₹118.94 crore in June 2023 to ₹4.28 crore in June this year. The company’s share price has tumbled by 18% this year.
Meanwhile, other companies like Rajesh Exports, VIP Industries, Mangalore Refinery and HPCL witnessed their net profit plummeting 90% in Q1FY25.
Westlife Food World saw its profits plunge by 89%. Its share has delivered measly gains of 3% this year.
A Bank of Baroda analysis — which examined the results of 2,539 companies excluding BFSI firms —- found that in the June quarter sales jumped 5.5% on a YoY basis compared to a decline of 2.5% recorded in the first quarter of the last fiscal year. Unfortunately, profit fell by 3.1% YoY as against a growth of 31.3% reported in the same quarter of the previous year.
The June quarter was India Inc’s worst Q1 earnings growth since the pandemic.
Invest wisely
A critical part of investing is to buy stocks at a cheap valuation, when the market is riddled with overwhelming fear and panic, and to sell them when the markets are saturated with irrational exuberance. Learning to read the signs and signals of the market is truly important. This is where the Appreciate app can be of great help to diligent investors. With our deep research capabilities and macroeconomic indicators, you will always be ahead of the market in decoding the market signals, and ensure that you stay one step ahead of the curve.
Warm regards,
Another week
in the markets
