Expert Analysis of the Global Macro Events & News affecting the Indian Markets
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Silicon Valley Bank: Modern Day Lehman?
Word on the street is that there might be some kind of crack in the US financial system. But what led to such claims? Silicon Valley Bank, one of the top US Banks, reported that they had to sell their assets at a loss of nearly $2 billion following a larger-than-expected decline in deposits.
What do you think will happen if any Indian Bank were to do so?
Spot on, investors will start to sell their holdings of the respective bank. Similarly, Silicon Valley Bank witnessed a decline of more than 60% in its share price. This jogged up the memory of US citizens of what happened in 2008. As a result, the top four banks in US, which are JPMorgan, Bank of America, Wells Fargo, and Citigroup, lost a mammoth $52 billion of market value. Their Bank Nifty , The KBW Nasdaq Bank Index, notched its largest decline since the pandemic roiled the markets three years ago.
The situation at the SVB is not fully indicative of the banking industry, but the struggle affects sentiment.
Strong US Job Growth
Let’s first look at the highlights of the Job report.
- 3,11,000 new jobs in February
- Average 3,50,000 new jobs each month considering the last three months
- The unemployment rate rose from 3.4% to 3.6%
- Labor force participation improved
- 4,00,000 people jumped back into the workforce
Overall, the report looks good. A decent number of jobs were produced, people are back into the system, and the unemployment rate increased but is still well within the acceptable region.
Just to bring in a different perspective, how will Feds view this report according to you? They are hustling to tame inflation.
Vedanta’s peanuts are worth $1 Billion
- Vedanta’s Indian Business has upcoming debt maturities worth $900mn by June. Anil Agarwal, the founder mentioned that “$1 Billion is peanuts for us”.
- We are covering Vedanta here because there have been concerns about its debt position. The effect of the Adani Group sell-off was reflected in Vedanta’s share prices.
- They have tried to offset the general perception and reported that they have enough cash flows and are planning to become a “zero debt company” in the medium term.
News that caught our attention
- For the first time in almost eight years, there was a small change in the Indian debt market, as the yield curve inverted slightly. This was because the one-year bond’s yield was about 0.3 basis points higher than the yield on the 10-year bond. The reason for this change was due to comments from Fed Chair Jerome Powell, which were seen as hawkish, and concerns about expected liquidity tightening in April.
Update on Portfolio Companies: Precision Camshafts Limited (PRECAM)
- As the name suggests, this company manufactures Camshafts, an essential part of an Internal Combustion engine used in your vehicles. But what is so special about it? Why do we like it?
- In the era of electric vehicles, when almost every automobile company is launching a new battery-driven vehicle, this company in our portfolio has provided solutions to large fleet owners by supplying them with retrofitting kits, that would convert their existing vehicles into e-vehicles. The only Indian player to do it with technology imported from its wholly-owned subsidiary in the Netherlands is Precision Camshafts.
- This innovative technology would enable fleet owners to cover their cost of conversion in just two years while increasing the life of the vehicle by at least five years and thus saving tons of operational costs. Initially, targeting fleet owners of delivery vans, waste collection trucks, and other intra-city operating vehicles, they have already signed up MoUs with several companies and are hoping to receive all certifications in the next couple of months. With technology and know-how from EMOSS, their Dutch subsidiary, they already have experience of more than one hundred million miles, and that makes us even more optimistic about the efficiency and reliability of their driveline kits. They have already set up their EV plant in Solapur and are expected to revolutionize India’s Light Commercial Vehicle market.
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Green Portfolio is a SEBI Registered (SEBI Registration No. INH100008513) Research Analyst Firm. The research and reports express our opinions which we have based upon generally available public information, field research, inferences and deductions through are due diligence and analytical process. To the best our ability and belief, all information contained here is accurate and reliable, and has been obtained from public sources we believe to be accurate and reliable. We make no representation, express or implied, as to the accuracy, timeliness, or completeness of any such information or with regard to the results obtained from its use. This report does not represent an investment advice or a recommendation or a solicitation to buy any securities.