It was yet another symbolic week for the markets as benchmark indices ended the week in the green while the Sensex surged past the 45,000 mark for the first time in history. A number of positive developments led to this feat. Record inflow of funds from Foreign Institutional Investors (FIIs), firm global cues amid positive macroeconomic data from China and the US, positive news on the vaccine development as the UK pledges to start vaccinations from next week were some of the factors that contributed to the momentum in the markets. One other important development was that the RBI revised its growth forecasts for India’s economy in the current fiscal (FY 2020 – 21). It now forecasts that the economy is set to contract by 7.5% instead of the previously expected 9.5% thanks to strong recovery post covid.
Anyway, before getting into further details about the markets and the economy, we thought of briefly talking about what is probably the oldest-yet-still-active conglomerates in the country.
Matter of Fact
The Wadia Group was established in 1736 when Lovji Nusserwanjee Wadia built a marine construction company, which went on to build 355 ships, including the first ships constructed for the British navy outside of England.
Fast forward to present-day, it is probably the oldest and still active conglomerates in the country, with famous companies under its control – the likes of which are Brittania Industries Ltd., Bombay Dyeing, Go Air, among others.The Wadia Group, established in 1736, is one of the oldest and still active conglomerates in India. Popular companies under it include Brittania, Bombay Dyeing, Go Air, among others. Click To Tweet
The Big Picture
- The India Manufacturing PMI measures the performance of the manufacturing sector and is derived from a survey of 500 manufacturing companies. The Manufacturing PMI declined to 56.3 in November 2020 from 58.9 in October, below market consensus of 57.3.
- The India Services PMI is based on data compiled from surveys sent to around 350 private service sector companies. The India Services PMI decreased to 53.7 in November 2020 from 54.1 in the previous month, and below market expectations of 55.5.
- The RBI kept its benchmark repurchase rate at 4% during its December meeting, saying it was maintaining an accommodative stance as long as necessary to support the economy hit by the COVID-19 crisis amid high inflationary pressure.
- The value of commercial bank deposits in India increased by 10.9% YoY in the fortnight ended November 20th, 2020.
- The value of commercial bank loans in India increased 5.80% in November of 2020 over the same month in the previous year.
Are markets overvalued? Ask the Buffett Indicator!
Over the past month, the Sensex and the Nifty reached record levels, with the Nifty 50 breaching 13,000 levels and the Sensex touching 45,000 only last week for the first time ever. All this when the economy seems to just be crawling out of the coronavirus induced recession. There seems to have been a disconnect between the economy and the markets. Despite weak economic conditions coupled with geopolitical tensions, markets have done fairly well.
This has fired up a debate about whether markets are overvalued or not. Famous investor Warren Buffett used a peculiar indicator to judge the valuation of an economy’s stock market relative to its historical average. After the govt released GDP data last week, this indicator signalled a massive overvaluation in the stock market. We took a deep dive into the implications of the same and whether the ‘Buffett Indicator’ tells us the full story behind stock market valuations. Read more, here.
A business unusual: Corporates in Banking
The banking sector is considered to be the single most important sector of any economy. People take it to be synonymous to the backbone of the country – and rightly so. A smooth and efficient banking sector ensures the flow of money and credit throughout the country. Not only does it ensure the smooth flow of resources but the economy also relies on the sector for efficient allocation of such resources to those pockets of the economy that deserve it the most.
Find out the sector’s most recent and important development in our breakdown below:
Signing off for the week – Happy Investing! 🙂
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