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Tesla’s sales took a beating

28th June 2024 – 5th July 2024 | Another week in the markets

S&P 500Nasdaq VIXDJIARussell 1000NYSE
Nifty 50GoldSilverBrent crudeUSD-INREUR-INR
1.30% 2.60%7.10%2.38%0.12%1.32%

Source: MarketWatch 

Hello Saturday,

This week, Tesla deliveries take a beating but the headline number performs better than anticipated, homes over 1 crore now account for 41% of India’s realty market and is Reliance hinting at a Jio IPO?

  • Tesla’s sales took a beating for the second quarter but not by the margin analysts anticipated. Tesla’s stock price rose in response to the numbers helping it retain the title of the world’s most valuable automaker over BYD.
  • Bank of International Settlements blows the alarm on rising government debt.
  • The affordable housing segment retreats into the background as flats over ₹1 crore account for 41% of the sales in the first half of FY24.
  • Could Jio IPO be on the cards? Analysts and market participants see signs

Taking stock | Tougher Tesla | Debt debacles | Mi casa es su casa? | Jio’s IPO soon? | Invest wisely | Another week in the markets

Taking stock

The new jobs report indicated that unemployment ticked up to a record high of 4% in June kindling hope that the Federal Reserve might be inching closer to a rate cut in September. The S&P 500 and the Nasdaq composite rose by 0.9% and 0.5% on Friday to close the week at fresh highs. 

Tougher Tesla! 

Tesla is putting up a spirited fight against muted EV demand and heightened competition. In the second quarter of FY24, the company reported sales of 4,43,956 cars — a slide of 4.8% on a year-on-year basis.

This slump, which was anticipated, is less than what was originally accounted for by market experts and analysts. The stock rose in response to better than anticipated numbers.

Muted EV sales aren’t Tesla’s cross to bear alone. Other carmakers have also been experiencing a sales rough patch despite outsized discounts and a spurt of low-interest and lease deals. Car makers, including the likes of established players like Ford and upstarts like Rivian Automotive, have been hit by the demand slowdown, and have issued warnings calling attention to the reluctance of customers to switch to EVs readily.

Meanwhile, analysts interpreted a fall in production as a positive for Tesla, at a time, when unsold inventories were piling up. In the second quarter, the company built 4,10,831 vehicles which is a 14% reduction in total units produced over the same period last year.

CEO Elon Musk faces one of the most strenuous challenges of his entrepreneurial career as he attempts to navigate the company through slowing sales while piloting a new project for more affordable cars and channelling funds in expensive bets of robots and self-driving technology.

The auto manufacturer has been running into rough waters in China as well, where sales last year plummeted by 24%. Alternately, Tesla’s rival — BYD — reported a 21% rise in sales last year.

Debt debacles!

The Bank for International Settlements, the central bank to central banks dotting the globe, issued a dire warning in its annual reports calling upon governments to reduce borrowing to deescalate one of the biggest threats looming over the stability of the global financial system.

In its annual report, the BIS warned that the spiralling debt levels posed a threat to the global financial system, just like the one witnessed in the UK in 2022. In the UK, investors were seen running away from government bonds, which effectively drove the yields on government bonds higher, weakened currency and triggered a meltdown in the equity markets.

The warning comes even as the US national debt continues to rise sharply over the past decade. The International Monetary Fund said earlier last week that US debt will reach 140% of the national GDP by 2032 if spending and taxation policies in the US are not changed. High deficits and ballooning debt are creating unsustainable risks in the US and global economy.

In its annual report, BIS pointed to the marked difference in the pre and post-Covid scenario. It said that before the pandemic, debt servicing was at historic lows, thanks to near-zero interest rates, which made running a large deficit a viable option for the US government. However, since then, new developments like energy transitions, geopolitical bickerings and the rising burden of ageing populations have ratcheted up government spending, and the cost of debt servicing.

Mi casa es su casa?

The first half of the 2024 Indian real estate market revealed a surge in sales, albeit not in the segment most expected to report strong numbers. The latest report by global real estate consultant Knight Frank titled, “India Real Estate: Residential and Office (January – June 2024),” shows that sales across India’s top eight cities rose by 11%, the highest jump in sales in the last 11 years.

The total number of units sold stood at 173,241 showcasing that strong appetite for home ownership in the current scenario.

The report also put the spotlight on a very interesting trend. Homes over ₹1 crore witnessed a significant sales increase, accounting for 41% of the sales in the first half of 2024. This is a sizable jump from the 30% sales accounted for by the same segment in the first half of 2023.

Meanwhile, sales in the affordable housing segment, which ranges from ₹50 lakh and more, dropped by 32% in the first half of 2023 to 27% in the first half of 2024. 

In the ₹1 crore and above segment, Mumbai emerged as the largest residential market clocking in sales of 47,259 units. In fact, unit sales in Mumbai reached a 13-year high in H1 of 2024. All the more interesting is the fact that overall Mumbai sales jumped merely by 16% compared to sales of premium flats —over ₹1 crore — which shot up by an incredible 117%.

NCR reported total sales of 28,998 units, whereas Bangalore registered sales of 27,404 units. Mumbai, Bangalore and NCR together accounted for 59% of the overall residential sales during the year.

Jio’s IPO soon?

Market participants and analysts are eagerly awaiting clarity from Reliance on the highly anticipated Reliance Jio IPO.

Several signs, especially the recent Reliance-helmed campaign to hike tariffs and the 5G monetisation move, are being read by market stakeholders as a signal that the telecom company could be priming itself for a market launch.

Analysts are indicating that the tariff hikes and 5G revenue boost are geared to amping up the Average Revenue Per User figure, which will be a key metric monitored by potential investors in Jio.

Brokerage house Jefferies said that it will parse the upcoming RIL AGM for any hints that the Jio IPO is due for a listing. “Rising focus on monetisation could be a precursor to its imminent listing.” the brokerage house said.

As per Jefferies, Reliance Jio is valued at around $133 billion, or ₹11.11 lakh crore. At such a valuation, Jio’s IPO promises to be one of the biggest IPOs, India has ever seen. As per current regulatory norms, any company with valuations vaulting over ₹1 lakh crore is required to sell at least a 5% stake in the company. This means that Jio’s share sale could be worth ₹55,500 crore, going by the Jefferies valuation.

Source: Google Finance 

Invest wisely 

Growth is almost always incremental and gradual. Sudden exponential growth, while more alluring, is hardly sustainable. It is only when we have a strong foundation that we can dare to aim for the very top. Such is also the case with company performance and stock markets. Patient and diligent investors, truly, outearn any trader in the long run. A trader who captures massive returns from unusual market movements also ends up losing them, when the market wind is blowing against him. An antidote to such erratic behaviour is to stick to fundamental research and keep investing with a time frame of 7-10 years. The Appreciate app can be of great help to diligent investors keen on investing their funds in fundamentally strong companies and other securities. It filters down companies with healthy business dynamics that are outliers, helping you multiply your wealth and prosperity in the long run.

Warm regards,
Another week
in the markets

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