Pen and calendar on a wooden table

SEBI moots a 2-phased same-day settlement cycle

16th December 2023 – 23rd December 2023 | Another week in the markets

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Source: MarketWatch 

Hello Saturday,

This week, Muted November inflation figures kindle hope for a Fed pivot, Adani Green Energy explores new avenues of raising new debt and SEBI moots a 2-phased same-day settlement cycle.

  • The personal-consumption expenditures index fell by 0.1% in November, its first recorded fall since April 2020. The decline has cemented hopes that the Federal Reserve will encounter no roadblocks to a rate cut in March.
  • Reportedly, Adani Green Energy is looking to raise at least $2 billion in new debt in 2024. The firm is currently in discussions with foreign institutional investors and global fundraising initiatives will kick off early next year.
  • India’s market regulator, SEBI, has pitched for a 2-phased implementation of a same-day payment cycle.
  • Beijing’s draft regulations for the online game industry have led to a massive market cap wipeout of Chinese online gaming companies. Tencent Holdings witnessed a $46 billion wipeout whereas Netease’s shares fell by 25%.

Taking stock| Inflation plummets, rate cut hope soars| Chasing greener pastures| SEBI shake-up| Gaming the system| Invest wisely| Another week in the markets

Taking stock

Investors cheered on as all three major US indices delivered gains for the eighth week in a row, making this the longest winning streak since 2017. Muted November personal inflation numbers bolstered belief that the Fed can break inflation’s pace, and bring it under the 2% ceiling. Dow Jones closed the week 0.22% higher, the S&P500 increased by 0.75%, while Nasdaq inched by 1.21% weekly. 

Inflation intricacies

November Personal Consumption Expenditure (PCE) index fell by 0.1%, for the first time since April 2020 restoring investor faith and confidence in the Federal Reserve’s targetted soft landing. Year-on-year, the PCE index rose by 2.6%, after reporting a 2.9% surge in October. It was in October that the PCE index fell below the 3% threshold for the first time since March 2021.

Core inflation —- inflation stripped of food and fuel prices —- was up by 3.2%, marginally lower than the 3.4% figure reported in the same month last year. The Federal Reserve would be keen on reining in the inflation figure to its targetted annual inflation figure of 2%.

On a six-month annualised basis, core inflation moderated to 1.9% indicating that the Fed rate cut is within grasp by March 2024.

A clutch of economists and market experts had warned of the US economy tipping into recession in 2023. However, elevated consumer spending, despite higher prices and unusually high-interest rates, proved to be critical growth drivers during the current inclement economic cycle. The new inflation numbers will further bolster the soft landing scenario. The much-vaunted soft-landing promises a cooling down of inflationary pressures without the prospect of hurtful job losses and hamstrung economic growth.

Fed officials have pencilled in three rate cuts in the coming year, which will drive down the highest interest rates that US citizens have seen in the last 22 years.

Chasing greener pastures

Adani Green Energy is looking to raise at least $2 billion, most of it in new debt as per a report in Business Standard. The company is said to be exploring different avenues including private debt placement, rupee and dollar bonds as well as offshore loans. 

The fundraising campaign is likely to start by early 2024, as per the report.

Meanwhile, Adani Green founders have reportedly chalked up plans of infusing over $1 billion into the firm’s operations. This development will provide more elbow room for the company to raise funds without weakening its credit indicators.

Adani Green’s fundraising plans have materialised in light of the benign rate cut commentary by the Federal Reserve. The company will be looking to raise competitively priced loans as the liquidity flow deepens within the US economy. The proposed fundraising will also help Adani Green diversify its credit sources.

The year 2023 turned out to be a period of trial by fire for the ports-to-power conglomerate. The group has been under tremendous pressure since January when the Hindenburg report charging the conglomerate of several corporate malfeasances first surfaced. Since then, the company has shed excessive debt, lured in reputed investors to invest in its operations and has even snagged US funding for its Sri Lanka port.

Adani green

Source: Google Finance

SEBI shake-up

India’s market regulator has pitched for a shorter payment cycle while being mindful that the reform cannot be rushed or implemented pell-mell. 

The market regulator’s consultancy paper has mooted a two-phased settlement cycle under which a T+0 settlement cycle will be provided for the equity cash market participants. The regulator has also attempted to address concerns raised by Foreign Portfolio Investors regarding liquidity challenges. 

Recently, SEBI Chief Madhabi Puri Buch indicated that a transition to a T+0 will be effected by March next year. She had also set a 12-month deadline from March 2024 onwards for a successful transition onto the instantaneous settlement infrastructure.

In the first phase of the proposed transition, under an optional T+0 payment settlement cycle, trades executed before 1:30 PM will be settled on the same day by 4:30 PM. During the second phase, an optional trade-by-trade settlement will be implemented during market hours. Once the second phase goes live, the mechanism under the first phase will be discontinued.

FPIs and other institutional investors will be exempted from following the mechanism in the first phase. However, they will enjoy no such relief once the second phase is implemented.

The transition to the T+0 settlement cycle will, in the beginning, be applicable for the top 500 companies by market capitalisation. Similar to the implementation of the T+1 cycle, the implementation of the first phase will be carried out in three separate tranches of 200, 200 and 100 companies, moving from the lowest market capitalisation to the highest.

Gaming the system

New draft gaming regulations issued by authorities in Beijing this week lit the fuse of a global game stocks’ meltdown. In the decimation that followed the release of the regulations, marquee gaming companies including the likes of Tencent Holdings, Netease, and Ubisoft Entertainment witnessed a massive plunge in their share price. 

Netease, a Chinese online gaming major, collapsed by a whopping 25% whereas Tencent took a 12% drubbing and ended the day with a loss of $46 billion in market capitalisation.

The rout was triggered by the Chinese media and video game regulator —- the National Press and Publication Administration. The authority has proposed curbs on the spending incurred by users during games, and a bar on minors tipping hosts in the course of live-streamed games.

The regulations would also bar gaming companies from offering lottery-based games to minors. They would also be prohibited from setting new incentives that will persuade gamers to spend more time and money online. This is the second time, since 2021, that Chinese authorities have moved to crack down on the widespread phenomenon of video game addiction among youths. 

China is the second-largest video game market after the US, and the proposed curbs will deliver a sizable dent to the top lines and profit margins of the gaming companies.

Invest wisely 

With inflation numbers coming in lower in November, the possibility that Fed officials will, indeed, press ahead with three rate cuts in the coming year has concretised further. Not surprisingly, US market participants are already chalking up 2024 to be a year powered by bullish sentiments. 

One must, nevertheless, be careful of investing during bull runs. Carefully entering positions only after conducting adequate research and due diligence is a must. In this journey, it is critical that one has a reliable and trustworthy partner by one’s side. The Appreciate app is one such partner that can maximise your profit potential and help you save your capital from sudden market swings.

Warm regards,
Another week
in the markets

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