Rs. 2,125 crore Pizzas
On May 22, 2010, a programmer named Laszlo Hanyecz made history by completing the first-ever documented real-world transaction with Bitcoin. What was the purchase, you might ask? Two pizzas. The astonishing part? He paid a staggering 10,000 bitcoins for those pizzas.
At the time, the exchange seemed inconspicuous, with a value of around $41 USD. However, fast forward to today, and the value of Bitcoin has skyrocketed, transforming those 10,000 bitcoins into a jaw-dropping fortune (Rs. 2,125 crore). At the Bitcoin all-time high, those Bitcoins were valued at Rs. 5,175 crore. What started as a simple transaction for a meal has become a symbol of the unpredictable journey and transformative power of digital currencies.
We find this tale both intriguing and emblematic of the ever-changing landscape in which we operate. It highlights the potential of emerging technologies to reshape industries and redefine value.
Quote of the month
Over the long run, well run businesses create a lot of value irrespective of the macroeconomic environment. Do we seriously think Amazon, JP Morgan, Michelin, Nestle, Siemens, Tesco, Walmart, Zara & other excellent businesses are held hostage to inflation and fiscal deficit? If the business & stock price performance of exceptional companies is immune to macroeconomic perturbations, aren’t we, as investors in those companies, better off ignoring the economy?
—Pulak Prasad, founder of Singapore based Nalanda Capital
From the global leaders:
JPMorgan’s bold forecast: India to become 3rd largest economy by 2027
India is the shining star of Asia now: Tyler Dickson, Investment Banking Head, Citi
India is in a good place but global economy is getting weaker, riskier: World Bank chief economist Indermit Gill
India among best places in emerging markets, macro economy stable: Chetan Ahya of Morgan Stanley
India a safe haven for investors, says Mark Mobius, father of emerging market investing
India is the best growth story in the world, and especially in Asia: Christopher Wood, global head of equity strategy at Jefferies
The macroeconomic landscape in India continues to demonstrate resilience and robustness across key indicators:
Manufacturing PMI: In October 2023, the Manufacturing PMI registered a value of 55.5, marking a slight decline from September’s 57.5. Despite this decrease, the index has sustained its expansionary phase (>50) for the 28th consecutive month. The deceleration in output expansion, the slowest in 8 months, can be attributed to a modest increase in new orders, which reached a 12-month low.
Services PMI: The Services PMI for the same period recorded a value of 58.4, reflecting a decrease from September’s 61.0. Nevertheless, the index has maintained its growth momentum for the 27th consecutive month, consistently staying above the 50-mark that separates expansion from contraction.
GST Collection: In October 2023, GST collections amounted to INR 1.72 trillion, marking a YoY increase of 13%. This achievement marks the twentieth consecutive month of collections surpassing the INR 1.4 trillion threshold, making it the second-highest recorded since the inception of the regime. Notably, the record collection of INR 1.87 trillion in April 2023 remains the highest.
Inflation: The CPI inflation rate for September 2023 eased below the Reserve Bank of India’s (RBI) comfort zone of 6%, settling at 5.02%. This marks the first time in three months that inflation has dipped below the target. The deceleration in the CPI rate can be attributed to a slowdown in food basket inflation, which registered 6.56% in September 2023, compared to a 9.94% rise in August 2023. Meanwhile, WPI inflation remained in negative territory, reaching a six-month high of -0.26% in September 2023, a slight increase from August’s -0.52%. Notably, food, fuel, and chemicals continued to experience deflation.
Foreign Exchange Reserves: India’s foreign exchange reserves saw a notable increase of $4.7 billion, reaching $590.78 billion and attaining a seven-week high.
Trade Deficit: In September 2023, Indian Merchandise Exports experienced a YoY decline of -2.6% to $34.48 billion, while Imports growth contracted by -15.04% YoY to $53.84 billion. The strengthening of the US dollar contributed to a narrowing of India’s trade deficit by $19.37 billion.
Credit Growth: As of October 6, 2023, Scheduled Commercial Bank Credit growth reached 19.32% YoY, surpassing the observed YoY growth of 17.93% on October 7, 2022.
Equity Market Overview:
The BSE SENSEX (-3.0%) fell in October, in tandem with other benchmark Indian indices.
BSE Mid-cap underperformed the SENSEX and was down -3.4%. The BSE Small Cap index outperformed, with a fall of -1.7% over the month.
Sector-wise, Realty, FMCG, Auto and consumer durables indices were the top 4 performers over the month, clocking +3.7%, -0.9%, -1.2%, and -2.3%, respectively. The worst performing index was the BSE Power index, which fell by -4.9%.
Market breadth declined MoM, with stocks trading above their respective 200-day moving averages declining to 69% from 85% from September 2023, and the advance decline line was down 11% MoM.
Net FII (Foreign Institutional Investors) flows into equities were negative for October (-$2.6Bn, following -$1.8 Bn in September 2023). DIIs (Domestic Institutional Investors) remained net buyers of Indian equities (+$3.4 Bn, from +$2.6 Bn from last month). YTD, FPI net buying stands at US$12.1 Bn, while DIIs have bought stocks worth US$19 Bn.
Mutual Funds’ Systematic Investment Plans (SIPs) achieved an unprecedented milestone, reaching Rs. 16,928 crore for the first time. SIP contributions since the start of financial year 2024 have surpassed the significant milestone of ₹1 lakh crore
Fixed Income:
Oct’23 saw fixed income yields rising on backdrop of global cues (sharp rise in geo-political risk, US treasury yields and crude price) & OMO concerns.
10-year G-sec yield (which was moving in the range of 7.20-7.24 at the start of the month), rose sharply, post Israel- Hamas conflict & OMO announcement in RBI Policy, to move in range of 7.35-7.39% during the month. It did ease to 7.30-7.32 range mid-month driven by better-than-expected monthly inflation print. 10 yr Gsec closed the month at 7.35% (Sep 2023 end: 7.21%). Money market rates remained elevated during the month on tight liquidity driven primarily by festive season and higher government balances. 10-year Term premia (10 yr over 365 days) rose to 21 bps (Sep 2023: 15 bps).
October 2023 saw complete reversal of Incremental Cash Reserve Ratio (ICRR) hike leading to increase in liquidity during the month. Core system liquidity (system liquidity + Government balances) improved from 3 trillion in Sep 2023 to 3.3 trillion by end of Oct-23, despite festive season demand.
November 2023 presents a set of critical events to monitor:
War and Oil: The ongoing conflict between Israel and Hamas poses a potential risk for equity markets. The threat of contagion and disruptions in oil supply, compounded by cuts from major producers like Saudi Arabia and Russia, may introduce heightened volatility in oil prices.
Earnings Season: The current Q2FY24 earnings season in India has generally exceeded expectations. However, the market remains cautious about post-results price performances. The remaining results will likely influence earnings revisions across the spectrum of Indian stocks.
State Election Outcomes: Elections in five states (Rajasthan, Chhattisgarh, Madhya Pradesh, Telangana, and Mizoram) in November 2023, ahead of the 2024 general elections, are crucial for shaping public sentiment. These outcomes will be closely watched as a significant factor impacting equity markets.
Festive Season Demand: November 2023 anticipates a boost in India’s private consumption and demand with the onset of the festive season, starting with Diwali. This period is expected to witness increased festive demand across the country.
Central Banks Commentary: Notable actions by central banks include the US Federal Reserve maintaining interest rates at a 22-year high, the Bank of Japan widening its yield target band, and the European Central Bank holding rates steady after ten consecutive hikes in October 2023. The Reserve Bank of India, in its October 2023 meeting, kept the key policy repo rate unchanged for the fourth consecutive time. Caution in response to energy and food inflation shocks was evident, suggesting potential divergences in policy stances in the coming months.
Market View:
Global economic trends pose challenges, with geopolitical events, high US bond yields, and slowing growth in the developed world presenting near-term headwinds. Conversely, India’s macroeconomic indicators remain robust, featuring strong manufacturing growth and improving economic activity, despite slowing inflation.
Considering local and global factors, it’s notable that the current market enthusiasm might be overlooking events like forthcoming elections and global developments such as rising crude oil prices. Large Caps, along with Asset Allocation products like Multi Asset Funds and Balanced Advantage, seem relatively well-positioned. Investors, wary of market swings, may consider a staggered approach aligned with their risk appetite and investment goals.
