News that caught our attention
Up until the SVB debacle, the entire market was fixated on a 50 basis point interest rate hike. The fed in this week’s meeting raised the interest rates only by 25 basis points, thanks to what’s happening with banks across the Atlantic.
This was the most ideal decision. If it was 50 basis points, the banks capital base would have shrunk further (as government bonds which is their biggest exposure, falter in value). And if they had decided to hold on the rate hike, this would have underlined the insecurities of the fed about the banking sector.
This is the fastest rate hike we have seen, and we are expecting one more rate hike. Markets are very dynamic that they have begun to price in a rate cut at the end of next year. If you look at bitcoin and other risky assets, they have done tremendously well recently owing to slackening of rate hikes.
Why are investors moving from Bank Deposits to Money Market Funds?
On another note, we all know how banks make money. They play the yield curve. Make loans with the deposits. They pay an interest on customer deposits while earning higher interest on loans they lent out.
But what if depositors are fleeing banks with their money and investing in let’s say LiquidBeES instead? This is whats happening in the US. Nearly USD 250 billion have been moved to money market funds (mutual funds/ETF’s that invest in short term government debt or commercial papers) from bank deposits – as per data reported by EPFR.
When you are getting better interest rates and immediate liquidity, why wouldn’t you move from bank deposits to money market funds?
Markets are in panic mode. But why are we obsessing over Manufacturing?
Markets are a defined by supply and demand, and it reflects good news and bad news, optimism and pessimism. As generic and unoriginal as it may sound, market is cheap!
We are obsessed about the manufacturing sector, mainstream media says you should invest in financials if you are looking to ride the India’s economic growth story, but we say its manufacturing.
Textile industry for example, we export USD 45 billion worth of textiles which is 1/3rd compared to what our best friend China does. Again, we command an almost negligible share in world exports – 4%.
Similar is the case for Chemicals. If we capture 10% of China’s export market share, the value of our Chemical sector nearly doubles.
We will be covering this topic in depth with sectoral insights, and actions we have taken to benefit from this growth in our upcoming newsletters.
Key event this week
Manufacturing PMI data release from China and the US is due this week. China is in expansion mode and US is in contraction mode – as per previously reported PMI data. And the forecasts do not differ from the ongoing trend.
Caixin China General Manufacturing PMI is of major importance because it focuses mainly on the private sector output. It’s a tug of war with the great China reopening on one side, and the export demand slump and struggling property sector on the other.
On a closely related note, it isn’t just India that is seeing a de growth in merchandise exports, China is too, despite the reopening.
Update on Portfolio Companies: Time Technoplast (NSE: TIMETECHNO)
- This week we would be discussing Time Technoplast Limited. It is a part of our Smallcap Compounders Smallcase. TTL is a global corporation, operating in 11 countries and involved in the manufacturing of innovative polymer & composite products. The group is second largest producer of composite cylinders in the world. It is down by almost 42% from its 52 week high.
- Primarily, this company is into two segments- Established Products and Value added Products. TTL has been expanding into latter because composite cylinders and CNG cascades, part of its value added range is a high margin product.
- While, packaging business has been doing fairly well, TTL is slowly and steadily pivoting towards high growth segment with a focus on expanding its value-added product range, while its established product range remains in the mature stage.
- A look at the numbers: Revenues increased by approximately 20% YoY this quarter whereas absolute EBITDA grew by 12%. In terms of order book, it has order from companies like Adani Total Gas Limited and IOCL. Capacity is fully booked and it is on its way to expand the production capacity.
- 15% growth rate guidance has been given my management, and schemes like Atmanirbhar Bharat and Pradhan Mantri Ujjawala Yojana are expected to aid the company in scaling up faster.
Explore Green Portfolio’s smallcases
Check out Green Portfolio’s newly launched – Ethical smallcase
Flexi-cap portfolio that invests in 15-20 value and growth stocks based on Ethical Investing principles.
- Import substitution beneficiaries.
- Supply chain re-shoring (China Plus One) beneficiaries
- Manufacturing oriented companies, from India and for the World
- Beneficiaries from infrastructure creation and related growth
- Consumption growth beneficiaries from aspirational middle class
- Philosophy is to invest in growing ethically strong businesses, having strong management, fundamentals and comfortable valuations.
- If a stock is reported non-compliant, we ensure that the portfolio gets updated in the upcoming rebalance.
- Dividend purification notification sent to all investors on a periodic basis.
Before you invest:
- Keep an investment horizon of 2-3 years for capital appreciation
- Rebalance schedule is quarterly
- Recommended investment amount is Rs. 2-5 lakhs
- Watch the video about this new smallcase
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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.