Rate-cut pathway clears

23rd August 2024 – 30th August 2024 | Another week in the markets

S&P 500	Nasdaq	VIX	DJIA	Russell 1000	NYSE
5,648.40	17,713.62	15	41,563.08	3,082.73	19,292.23
0.24%	-0.92%	-5.42%	0.94%	0.24%	1.04%
Nifty 50	Gold	Silver	Brent crude	USD-INR	EUR-INR
25,235.90	$2,535.90	$29.24	$77.05	83.87	93.81
1.66%	0.61%	-2.08%	-2.49%	0.07%	5.31%

Source: MarketWatch 

Hello Saturday,

This week, Apple and Nvidia open their coffers for investment in OpenAI, Personal Consumption Expenditure inflation numbers hold steady in July and entry-level bikes report a ho-hum performance between April and July this year.

• Apple and Nvidia are eyeing a stake in OpenAI, in a fundraising round that values OpenAI over $100 billion.
• Personal Consumption Expenditure rose 2.5% in July from a year earlier.
• Entry-level bikes, that is, bikes in the 75-110 cc deliver a muted performance indicating a premiumisation trend.
• June quarter delivers sobering news: India’s GDP slows to a 15-month low of 6.7%

Taking stock | Opening up to OpenAI | Rate-cut pathway clears | Two-wheeler troubles | GDP groans | Invest wisely | Another week in the markets

Taking stock

All three major indices put the memory of the harrowing August 5th Monday meltdown behind them to close August on monthly gains. The S&P 500 jumped 2.3% from July end, within a stone’s throw of its record close. The Down Jones delivered 1.8% for the month and the tech-dominant Nasdaq inched up 0.6% for August.

Opening up to OpenAI!

Apple and Nvidia are in talks to invest in OpenAI, a move that could yield bountiful returns for the two tech majors in the artificial intelligence race.

As per media reports, venture capital firm Thrive Capital is leading the fundraising round, which values the AI research organisation at over $100 billion. Interestingly, Microsoft will also be participating in the round, although the exact quantum of its investment has not been disclosed. The investment kitties of Apple and Nvidia are also not known.

As of now, Microsoft has a 49% stake in the organisation. The software giant kicked off a series of investments in 2019 in OpenAI, which currently amounts to $13 billion.

Meanwhile, earlier in June, Apple announced that OpenAI would be its first official partner for Apple Intelligence — the company’s system responsible for embedding AI features across its operating system. For starters, the new AI capabilities will deliver an improved Siri, text proofreading and custom emoji creation.

Apple will leverage OpenAI capabilities to resolve more complicated demands such as generating a written reply. Craig Federighi, Apple’s head of software recently said that the company first opened its doors to OpenAI as it “wanted to start with the best”

Apple has been branching out, and engaging with other firms in a bid to elevate its AI game. Apple also commented in June that it looks at Google’s Gemini as a potential partner. The iPhone and iPad manufacturer has also been in talks with Meta as well as AI startups like Anthropic and Perplexity.

Moving on, Nvidia has stepped up its investment game in the last two years and has been plowing funds into AI firms like Inflection AI and Databricks. OpenAI also holds the distinction of being one of the largest customers of Nvidia utilising thousands of chips to train its models.

Rate-cut pathway clears!

Federal Reserve’s preferred inflation gauge, Personal Consumption Expenditure data, held steady in July rising 2.5% compared to a year earlier.

THE PCE figure matched expectations of economists polled by The Wall Street Journal. In June, the PCE figure had also risen by 2.5% compared to a year earlier.

The core index, which does not include food and fuel data, held steady at 2.6% in July compared to a year earlier. The core PCE data came in a tad lower than economists’ projection of 2.7%.

Last week, Federal Reserve Chair Jerome Powell ushered in some much-needed relief for the markets and the economy when he said that “the time has come for policy to adjust. ” He further noted that the time and pace of the rate cuts will depend on the incoming data, evolving outlook, and balance of risks.

The next Federal Open Market Committee meeting is slated for September 17-18, and large parts of the market are accounting for a 25bps rate cut, while a few believe that the Fed might push out a 50bps rate cut.

Two-wheeler troubles!

India’s two-wheeler market is inclining towards premiumisation. Data from the Society of Indian Automobile Manufacturers (SIAM) shows that sales of entry-level motorcycles lagged far behind overall motorcycle sales. 

For the period between April to July, a little over 18.5 million motorcycles were sold in the 75-110 cc category. The entry-level category’s sales grew by 8%. Meanwhile, overall motorcycle sales grew by 13.5%.

What is all the more interesting is that the sales in rural areas outpaced urban area sales. In the April to July period, sales in rural zones jumped 14.5% vis-a-vis urban areas with reported growth of 12%.

Market analysts said new sales figures indicate a strong underlying trend towards premiumisation in the segment. Experts believe that a three-pronged factor is driving sales away from the entry-level segment: Disruptions from the election season, a lack of marriage season and rising disposable income are directing prospective customers towards premium bikes.

Source: Google Finance 

GDP groans!

India’s GDP growth slowed to a 15-month low in the April-June quarter to 6.7% due to a fall in agricultural and trade-related services output. Muted government spending on account of general elections and a year-earlier high base effect also tamped down on growth numbers.

The GDP data came in markedly lower than the Reserve Bank of India projection, which had forecasted a 7.1% growth rate for the quarter. Gross Value Added, a metric that strips out indirect taxes and subsidies, grew by 6.8% as against 6.3% in the preceding quarter.

Nevertheless, India was still a bright spot in the otherwise gloomy global economy map, emerging as the fastest-growing economy in the June quarter.

Total government spending for the quarter took a marginal fall to ₹4.14 lakh crore from ₹4.15 lakh crore reported in the same period last year. The minor tumble in government spending was offset by industrial production growth, which stood at 5.2% compared to the 4.2% growth reported in the corresponding period last year.

Despite global trade expanding at a snail’s pace, India achieved a respectable export growth rate of 8.7%. Private consumption also leapt from 5.55% a year ago to 7.45% in the quarter.

Invest wisely 

Markets go through alternating phases of boom and bust. Wealth created during bullish spells is often foregone by investors, in a desperate hankering for more and more returns. This, often, backfires. Investors must keep their life goals in mind, and book profits if those goals are achieved. After booking profits and saving for a rainy day, investors are free to dream bigger and higher, and create new positions. However, mindlessly going along in an irrational rally often leads to losses. This is why 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 a step ahead of the curve.

Warm regards,
Another week
in the markets