Talking Points This Week: Donald Trump, RIL, Equity Markets And IPL
Every week, Niraj Shah studies how top business leaders and market makers are navigating the fast-changing financial landscape.
This week was a truncated one for India, and only on the final day did Indian markets finally react to how global markets have behaved. A lot of stocks had a relief rally, India saw an upgrade and biggies had positive news flow. And this led to the markets being the key newsmaker despite the indictment news of Donald Trump, a case of a U.S. journalist detained by Russia and continuous outflows from the PE end in India.
Donald Trump was indicted in New York for directing hush money payments to a porn star during his 2016 campaign, a historic event in American law and politics that is certain to divide an already polarized society and electorate, as per a Bloomberg article.
And this week also saw a historic detaining of an American Journalist in Russia, something not seen since the Cold War, as well as India unveiling a new foreign trade policy, and Japan and Korea making new policies to arrest the fall in birthrates.
Also, after the spate of news flow on debt funds, there was one more in terms of SEBI introducing the Corporate Debt Market Development Fund, a backstop facility for specified debt funds during market dislocations and to prevent recurrences of events, such as the one with Franklin Templeton MF.
Indian Markets End Strongly
The week ended well for Indian markets. Led by a broad-based rally, Indian markets ended the week on a high. Everything from Reliance Industries Ltd. to ICICI Bank Ltd. to Infosys Ltd., the list was large. In fact, only four stocks ended in the red in the Sensex, a testimony to the strength in the index. Aside from an oversold market finding straws to clutch on in newsflow of RIL and a Nasdaq rally, what may also have helped is one of the first global upgrades on India.
Morgan Stanley's Jonathan Garner, in his recent note on Asia, upgraded India to an EW from an UW stance, even as the house stayed OW on China, Korea and Taiwan. Garner says they are upgrading India to EW given narrowing valuation premiums and a resilient economy. While this may in itself not seem too strong, in light of the fact that this is arguably the first of the UWs to move away, it holds significance. Maybe it is a happy coincidence, but the markets rallied post the upgrade.
The litmus test would be whether the markets can sustain the optimism in the wake of rising crude prices and a truncated week having the MPC meet. Interesting week ahead.
RIL Moving After Stagnancy Despite Recent Sell-Side Optimism
A bunch of brokerages have written fairly optimistically about the stock prospects of Reliance Industries. Despite this, the stock has largely stayed flat in the last 15 days, and has corrected nearly 5% in the month of March, only for an announcement on the demerger of Jio Financial Services to reverse those losses.
Mind you, for the month, the stock is still only just positive and the stock has been the top drag on the overall market capitalisation on India since June 2022, which was the last time the overall market capitalisation of India went below the $3 trillion mark.
A note from Macquarie highlighted some reasons why there are positives to Reliance, but headwinds as well. The analysts note that while a spin-off of Jio or retail businesses may be a sentiment positive, they don’t see incremental value crystallisation as premium valuation is already embedded, while post any transaction a conglomerate discount would apply, which generally is not in consensus today.
However, there has emerged support at current levels with the shares finding a bottom around Rs 2,200, as they have in the past two years and with general positivity going into the AGM in the next ~4 months.
A Different Kind Of Problem
Alarmed by an even faster-than-expected slide in the number of babies born last year, Japan’s Prime Minister Fumio Kishida is preparing a policy package that he says is a last chance to keep society functioning, as per a Bloomberg story.
Apparently, ideas thrown around recently include compulsory paternity leave, cancelling student debt for people who have a baby, and ¥10 million ($76,445) payouts for a third child.
But it is not just Japan, but even South Korea that has a population issue. The country has a fertility rate that ranks as the lowest in the world, as per its president. The President is calling for new initiatives to fix past policies that he sees as broken. South Korea faces the prospect of its population of 51 million people more than halving by the end of this century. It's an issue in stark contrast to the population explosion in some of the Asian countries, including India.
By The Way
IPL 2023 starts today. For the first time, people will be able to watch the mega event for free, and for the first time, it follows the maiden WPL tournament, which had its own following as well.
Suffice to say, India will be glued to the screens. I am interested to know, at the end of the event, as to whether the digital screen scored more view time or did television still rule, for this is the first time that two competing broadcasters will be locked in a television versus digital battle. Looking forward to the stats.
Niraj Shah is Executive Editor at BQ Prime.