04th October 2024 – 11th October 2024 | Another week in the markets
| S&P 500 | Nasdaq | VIX | DJIA | Russell 1000 | NYSE |
| 5,634.61 | 18,342.94 | 20.46 | 42,863.86 | 3,176.85 | 19,711.22 |
| 1.35% | 1.13% | 6.51% | 1.21% | 1.16% | 0.88% |
| Nifty 50 | Gold | Silver | Brent crude | USD-INR | EUR-INR |
| 24,964.25 | $2,647.20 | $31.74 | $78.79 | 84.10 | 91.99 |
| -0.20% | 0.04% | -2.17% | 0.83% | 0.09% | -0.27% |
Source: MarketWatch
Hello Saturday,
This week, Tesla’s much-hyped robotaxi event turns out to be a dud, JP Morgan Chase believes that the Federal Reserve has achieved a soft landing and Small Finance Banks are headed for a rocky patch in FY25, thinks Crisil.
- Tesla’s shares slipped by 8.8% on Friday after the robotaxi event
- Investment banker JP Morgan Chase indicated that the US economy remains strong for both consumers and big companies, hinting that the Federal Reserve has managed to pull off a soft landing for the economy.
- Novo Nordisk takes big bets on India
- Crisil believes that the SFBs have rocky roads ahead of themselves in FY25.
Taking stock | Tesla delivers a dud | High praise from JP Morgan Chase | Novo Nordisk’s India bet | SFBs slated for a rough run | Invest wisely | Another week in the markets
Taking stock
The S&P 500 and Dow Jones notched record highs as the earning season took off. The S&P 500 ended Friday with a 0.6% gain, standing at 5,815. Dow Jones also rose by nearly 1% on the back of JP Morgan’s strong third-quarter numbers. The tech-heavy Nasdaq rose by 0.3%.
Tesla delivers a dud!
Tesla’s big bang event turned out to be a dud. Unimpressed by the hype and shebang in the event, investors pushed the car maker’s share price towards an 8.8% fall, triggering a $67 billion market capitalisation wipe-out. The $67 billion figure is bigger than the total worth of General Motors or Ford Motor.
There was massive anticipation for the Friday event within the investors’ circles, who were keen on perusing how the carmaker will execute its pivot into a robotics and artificial intelligence power player. However, investors were seen complaining that the event was high on showbiz and hoopla, and low on business details.
At the minutely planned event, Elon Musk—Tesla CEO—arrived in a two-wheeler driverless cab called the Cybercab. The Cybercab drove itself, had no steering wheel or pedals, and could find its way through a dark parking lot. Musk also surprised investors by revealing the Robovan, an autonomous shuttle capable of transporting 20 people simultaneously. Robotic technology developments were also visible at the event in the avatar of Optimus robots that mingled with robots and served as bartenders.
Earlier this year, Musk re-aligned Tesla towards robotics and autonomy in a bid to offset the falling sales in the EV segment, and the growing threat from Chinese car manufacturers.
Investors at the event were disappointed that no details were divulged about the ride-hailing app, a sneak peek of which was given in spring. Disappointing the investors further were the scant details forthcoming about the business model of fully automated taxis.
Source: Google Finance
High praise from JP Morgan Chase
In its latest quarterly results, America’s largest bank confirmed that the Federal Reserve had, indeed, managed to pull off a soft landing. The bank said that the US economy remained strong for both consumers and big companies coupled with declining inflation and robust economic growth.
The bank also raised its forecast on revenue earned from lending even though the Federal Reserve has been cutting rates. Chief Financial Officer Jeremy Barnum said that the third quarter results of the bank are pretty consistent with a soft landing, and in line with the Goldilocks economic situation, in which the US finds itself right now.
Meanwhile, analysts have indicated that the Federal Reserve’s rate cut will take time to make its way through the US economy, and it will be a few more quarters before the banks’ profits from lending start showing a decline.
Alongside JP Mogan, fellow big bank Wells Fargo also posted results that exceeded market expectations. Shares of JP Morgan rose 4% and closed at their all-time high of $222.29 on Friday. Wells Fargo shares also jumped 5% and ended the day at $60.99.
The third-quarter results of both banks support the paradigm that inflation is inching towards the Fed’s target, unemployment is at low levels and consumption remains strong.
JP Morgan Chase’s profit for the third quarter fell 2% to $12.9 billion, but managed to outperform expectations, thanks to a large lending profits. Profits dropped because of spiked losses in credit-card loans. Revenue rose by 7% to $42.6 million.
Novo Nordisk’s India bet!
Blockbuster anti-obesity drug Wegovy’s manufacturer, Novo Nordisk, has been amping up its presence in India by expanding its senior leadership base in the country and penning down partnerships with local start-ups.
The Danish drug manufacturer, which made its first foray in India 17 years back in Bangalore is looking to expand its operations in India, given the country’s large population base and lucrative market prospects.
John Dawber, Novo’s managing director for global business services told the media that the company plans on doubling the number of global process leaders in India, over the next three to four years, and pushing its overall headcount to 5,000 by next year.
Novo isn’t the only company that is doubling up on its India investment bet. Earlier this year, Sanofi unveiled plans to invest $437 million in its India subsidiary. Another pharma major, Bristol Myers Squibb also confirmed that its India facility is slated to become its largest manufacturing unit, outside of the US facility.
Meanwhile, 50% of Novo’s global safety assessment workload — which involves tracking reports of drug side effects and communication with regulators —- is handled by India operations.
The company has also cemented partnerships with 10 start-ups, which will be tapped to employ artificial intelligence for summarizing documents, extracting insights and examining editing errors, if any. Some of these AI tools, Dawber highlighted, are being used across its global operations.
SFBs slated for a rough run!
Ratings agency Crisil has warned that the profitability of small finance banks could take a hit in this fiscal.
Profitability as seen by the lens of Return on Assets will taper by 40 basis points to about 1.7% this fiscal compared to 2.1% as reported in the last fiscal, as per the report. The fall in RoA will be on account of an increase in credit costs and lower net interest margins.
However, SFBs might still turn out to be a better bet as the report highlights that the RoA of SBFs will still be higher by 50-60 bps compared to the overall banking system. This is because the loans disbursed by SFBs have relatively higher yields.
The report also marked out that NIMs for SFBs will contract given that they will be diversifying their exposure to secure asset classes, which have lower yields.
Meanwhile, rising delinquencies in the microfinance and other unsecured loans segment will contribute to credit costs rising by 40 bps.
Last month, Deputy Governor of the Reserve Bank Swaminathan J directed SFBs to be vigilant and ensure that risks are controlled in time.
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
