26th April 2024 – 3rd May 2024 | Another week in the markets
| S&P 500 | Nasdaq | VIX | DJIA | Russell 1000 | NYSE |
| 5,127.79 | 16,156.33 | 13.49 | 38,675.68 | 2,809 | 17,797.89 |
| 0.55% | 1.43% | -10.25% | 1.14% | 0.56% | 0.19% |
| Nifty 50 | Gold | Silver | Brent crude | USD-INR | EUR-INR |
| 22,475.85 | $2,310.10 | $26.78 | $82.78 | 83.38 | 89.75 |
| 0.25% | -1.68% | -1.62% | -6% | -0.03% | -0.64% |
Source: MarketWatch
Hello Saturday,
This week, the Federal Reserve invests its faith in the higher-for-longer stance in the fight against inflation, India’s competition regulator finds Flipkart and Amazon in breach of antitrust laws and RBI lifts restrictions from Bajaj Finance’s Insta EMI card.
- Federal Reserve Chair Jerome Powell signals he is more likely to retain the interest rates at their current levels than hike them.
- Hugo Boss’ net profit shoots up as marketing push bears fruits
- Flipkart & Amazon find themselves under the regulatory glare of the Competition watchdog
- Bank of America Securities hints at 20-25% telecom tariff hikes post-election results
- RBI delivers relief for Bajaj Finance by lifting restrictions on two of its credit products
Taking stock | Higher for longer | Bossing around | Amazon & Flipkart in the dock | Telecom teasers | Bajaj Finance bounces back | Invest wisely | Another week in the markets
Taking stock
Renewed hope for rate cuts in the second half of the year and Apple’s announcement of a $110 billion buyback kept the markets in good cheer. The Labour Department’s monthly jobs report also threw up data showing that hiring slowed down in April. The tech-heavy Nasdaq rose by 2% on Friday finishing off the week with a 1.2% gain, while the S&P 500 popped 1.3%. Dow Jones added 1.2%.
Higher for longer
The Federal Reserve can’t seem to catch a break.
In its latest Federal Open Market Committee meeting, Federal Reserve Chair Jerome Powell admitted that there have been setbacks in the fight against inflation but pointed out that the Federal Reserve would likely keep interest rates higher for longer rather than increase them again.
Fed officials on May 1 decided in favour of holding the benchmark rates in the range of 5.2-5.5% — the highest level in the last two decades. Interest rates have hovered at this level since last July, when inflationary winds started jacking up cost pressures across the American economy.
Chair Powell said that because of the new run of hotter-than-anticipated inflationary figures, “It’s likely to take longer for us to gain confidence that we are on a sustainable path” to lower inflation. He said that he expected inflation to decline this year, but added, rather cautiously that “my confidence in that is lower than it was,”
Despite the ominous undertone, Chair Powell asserted that interest hikes were not back on the table unless the Fed had hard evidence that the higher interest rates weren’t bringing down inflation.
“That will be a question that the data will have to answer,” said Chair Powell.
US markets rose after comments by Chair Powell, however, closed with losses as they processed the complete fallouts of the higher for longer stance. The S&P 500 rose 1.2% in the afternoon, only to close down 0.03% following the address of Chair Powell.
Chair Powell also indicated his discomfort with the 3% inflation rate, stressing that “3% can’t be in a sentence with satisfied.”
Bossing around
German premium fashion firm Hugo Boss beat market expectations as net profits for the first quarter soared to 38 million euros on an aggressive marketing push.
The company said that customers and retailers had given a healthy response to its spring and summer collections bolstering net profit, which was also being supported by cost-cutting initiatives and a brand revamp.
Total sales for the fashion label jumped to 1.01 billion euros from 968 million euros in the same period last year. Operating profit, the company said, rose 6% to 69 million euros, outsizing the 65 million euros market estimate.
The company also issued worrisome sales guidance mentioning that stagnant discretionary spending and geopolitical rumblings could endanger the sales target for the current and the coming fiscal year.
“The company remains vigilant with regard to the persistently high levels of macroeconomic and geopolitical uncertainty, which are expected to continue weighing on global consumer sentiment in fiscal year 2024,” Hugo Boss said in a statement.
Amazon & Flipkart in the dock!
E-commerce majors Amazon and Flipkart are in the dock for antitrust violations.
A probe carried out by the Competition Commission of India’s Director General (investigation) has found that the two companies are in contravention of competition laws in India.
Business Standard reported that the probe document detailing the violations will be shared with the parties involved, including the original informant —Delhi Vyapar Mahasangh — soon. The four-year-old case concerns a complaint filed by the Mahasangh alleging anti-competition practices adopted by Amazon and Flipkart, which led to the closure of the business of lakhs of its members. The body alleged that the two giants were doling out predatory discounts on online sales of smartphones and cherry-picking sellers.
Via an order in January, the CCI had kicked off a probe into the on-goings of the two companies under the relevant sections of the Competition Act, 2002.
“It needs to be investigated whether the alleged exclusive arrangements, deep-discounting, and preferential listing by Flipkart & Amazon are being used as an exclusionary tactic to foreclose competition and are resulting in an appreciable adverse effect on competition contravening the provisions of Section 3 (1) read with Section 3(4) of the Act.”, the order read.
Recently, in February, the Confederation of All India Traders, an industry representation body for retail traders across India, wrote to the CCI urging it to categorically resolve anti-competitive allegations levelled against Flipkart & Amazon.
Further, the All India Mobile Retailers Association had sent a letter to the CCI Chairperson Ravneet Kaur urging her to crack down on the malpractices within the e-commerce ecosystem that compromise consumer rights and promote illegal business practices. This, the letter said, ultimately blocks market cash flow and dent the exchequer’s revenue collection.
Telecom teasers!
A research note by BofA Securities states the Indian telecom sector could witness a tariff hike to the tune of 20-25% as opposed to the earlier expectations of 10-15% in the post-election results scenario.
The Lok Sabha election results will be released on June 4.
BofA Securities suggests that Indian telecom companies could utilise their improving cash flows from higher tariffs to foster high-margin offerings like margin broadband and enterprise data.
The financial services company also added that once the 20-25% tariff hike is absorbed by the customers, telecom companies will start another round of tariff hikes in the coming 12 months. Telcos, the brokerage believes, would do so to monetise their 5G investments.
The brokerage also pointed out that any visibility on the slated and widely anticipted initial public offer of Reliance Jio would be a key event to watch out for in the sector’s development.
BofA Securities added that Vodafone Idea presents the highest potential for a tariff hike. The research note said that Vi is a pure telecom play which could deliver a 5% increase in Average Revenue Per User, which will contribute to close to a 12% surge in the company’s Earnings Per Share (EPS).
Having said that, the brokerage also clarified that Vi is not a ‘buy’ currently as BofA is looking for clarity on improvement in funding positions after FY26 when the spectrum moratorium will end.
BofA upgraded the 2025 and 2026 EPS estimates for Bharti Airtel by 5-6% but reduced RIL’s EPS by 2-3% due to higher depreciation and amortization.
Source: Google Finance
Bajaj Finance bounces back!
Good news greeted Bajaj Finance investors late Thursday as the company announced that RBI had lifted the restrictions placed on its leading products ‘eCOM’ and Insta EMI Card’ with immediate effect.
Henceforth, the NBFC can proceed with sanctioning and loan disbursal via these business streams.
Back in November 2023, the RBI had barred Bajaj Finance from issuing loans under these products on account of deficiencies in digital lending guidelines, particularly non-issuance of Key Fact Statements to the borrowers under these two lending products and the deficiencies in the Key Fact Statements issued in respect of other digital loans sanctioned by the company.
The Insta EMI Card provides pre-approved credit up to ₹2,00,000 for small ticket purchases.
The digital lending guidelines, as chalked out by the RBI, state that a lender should disclose all fees and charges levied on the borrower upfront and give a detailed description of the recovery practices adopted by the company, in case of a default.
The RBI marked out that these details were not provided by Bajaj Finance for the two products. After the ban order, Bajaj Finance gave a clarification stating that the bar on the issuance of loans via the two products would not have “a material financial impact” on the company.
Invest wisely
The key to creating wealth in the markets is to keep booking profits as and when the returns align with one’s life goals. Putting off one’s financial goals, just to earn more returns leads to a situation where investors, swayed unduly by their greed, willingly forego hefty returns. One must never lose sight of the fact that the market returns are here to complement your journey through different phases of life rather than being the end-all and be-all. With the deep research prowess of the Appreciate app at your disposal, you can navigate the complexities of the US stock market by identifying stocks that can deliver great returns.
Warm regards,
Another week
in the markets
