Power of Powerful Management!
Ever wondered what makes a company so special? What is the secret sauce of the company’s success?
In a nutshell, it all lies in its quality of management. At the end of the day, firms are nothing but a group of people working together to achieve a common goal.
A company’s management plays a vital role in shaping the fortunes of a business. Ultimately it is the management that decides this goal and steers the company towards it.
Over the years we have seen great shuffles of leadership roles in many companies. Whenever a new individual with rich experience joins the organization, there is a lot of enthusiasm and confidence among investors.
Some firms have witnessed a significant turnaround in their business while others failed. A classic example would be N. Chandrasekaran taking over the helms of India’s biggest conglomerate Tata Sons in 2017. Tata Group’s market capitalization has risen from Rs. 4.8 lakh crore on April 1, 2017 to Rs 23.6 lakh crore as on March 31, 2022.
Similarly, the appointment of Suresh Narayanan was a blessing for Nestle in 2015 when the company was facing the worst crisis ever with its brand “Maggi”. He restored confidence in the business and brought back the trust of its customers and investors.
On the other hand, the management of ICICI Bank changed in 2009 when Chanda Kochhar became the CEO of the company. She stepped down in 2018 due to a conflict of interest.
The absolute return of the stock during her tenure was 308% excluding dividends. This was far less compared to private banking peers like IndusInd Bank, Kotak Bank, and HDFC Bank which generated gains of 3,463%, 1,066%, and 768% respectively during the same period.
It is important to note that success doesn’t always last in a business…one bad decision can lead to the erosion of shareholders’ value. Investors often fall into the trap and end up losing money.
Therefore before investing in any company, investors should determine the quality and integrity of the management.
Here are some of the factors that one may look at…
Investors should keep in mind the advice of the veteran investor Warren Buffet who said,
“I think you judge management by two yardsticks. One is how well they run the business, and I think you can learn a lot about that by reading about both what they’ve accomplished and what their competitors have accomplished, and seeing how they have allocated capital over time.”
In order to identify good or bad businesses, investors are advised to carefully study and monitor the management’s actions.
Technical Outlook:
Nifty50 index closed on a negative note after forming a bearish evening star candlestick pattern on the weekly timeframe. The short-term trend is still bullish, however, the market still remains elevated from the means at the same time, so the upside is likely to remain capped. The said candlestick pattern suggests a mild profit booking decline. On the other hand, BankNifty and major US equity indices are exhibiting relative strength in the short term. We believe the levels around 17400 on Nifty are likely to act as make or break levels. A break below the same can lead to a retest of the 17100 going ahead. Until then traders are suggested to maintain a mildly bullish outlook.
Expectations of the Week:
Although the upcoming trading week will be shorter than usual, it will undoubtedly be action-packed. To start with, Mr. Market would be all ears for India’s GDP growth rate and S&P Global Manufacturing PMI to determine the progress of the economy. On the global front, markets are expected to be choppy in the next week as US initial jobless claims and unemployment rate unfolds. Nifty50 closed the week at 17558.90, down 1.12%.

2020s - The Indian Decade!
A week ago, India celebrated its 75th Independence Day. The journey from 1947 to now has been inspiring. Despite all the macro and micro challenges, India stands tall as the fastest-growing major economy. Its path to becoming a superpower appears less bumpy than before.
In this article, we will discuss why the future prospects of India are bright and why it will continue to be the fastest growing and the most exciting major economy.
India looks better now
India's manufacturing PMI hits an 8-month high in July whereas the Services sector PMI climbs to an 11-yr high. The real estate activity continued its upward trajectory as seen in stamp duty collections which is up 112% FYTD23.
The Q1FY23 earnings were keenly awaited as it was seen as the first quarter of the post-covid-world. The quarter gone by was resilient and despite global challenges, it was able to stand its ground. The global commodity prices fell by 13% in June. Most companies anticipate the commodity prices to peak out in Q2 and thus aiding the corporate margins going forward.
Despite the increase in gas prices, the volume growth of major Gas players has been in the range of ~60% indicating a strong recovery in the manufacturing sector. The banking sector has been in one of its best shapes as it reports a cumulative net profit growth of ~38% YoY. It witnessed strong improvement across all other significant parameters as well.
Weakening crude oil price to aid India
This is no secret that the fluctuations in crude oil prices have a serious impact on the Indian economy. Crude oil accounts for approximately 20% of India’s total imports. Thus, rising crude oil negatively impacts the balance of payments and contributes to inflation.
The crude oil prices have been on a decline. The brent crude oil futures are at a 6-month low and stands at 93.65 vs the high of USD 123.21 in March 2022. The anticipated dip in the global economy especially in the USA and China due to monetary tightening is the key reason.
If the proposed Iran-Eu deal materializes, Iran could ramp up sales within months and flood the global markets with millions of barrels of oil. This would help relieve the tight global market and help in cooling off the crude oil prices further.
Globally Attractive
A couple of years back India’s weight in the MSCI EM index was closer to the ASEAN countries. It has now crossed South Korea and stands close to Taiwan. India’s weight in the MSCI EM index has risen from 8.1% in October 2020 to 13.96% now.
Also compared to other emerging economies India has a higher number of companies (121) with free-float market capital greater than USD 2bn (Korea – 60; Taiwan – 36). A higher free float market cap encourages more investors to participate as these stocks tend to be less volatile.
Further China plus one strategy has regained its momentum post-Covid and India is ideally placed to be its biggest beneficiary.
The public and private investments in infrastructure, the advancement of technology, and the development of an R&D ecosystem are substantially responsible for the structural improvement of the economies of the USA and Japan. In the past years, India’s focus has been on similar lines, and thus it is expected this decade to be ours.
Technical Outlook:
Nifty50 index closed on a positive note for the fifth consecutive week and formed a shooting star candlestick pattern on the weekly chart. The short-term trend is still positive but at the same time the index has become overbought temporarily and the bulls seem to have become tired after an overstretched move, which is also evident from the candlestick pattern. On the other hand, Nifty formed a bearish engulfing candlestick pattern, so a mild profit booking decline cannot be ruled out. The positional outlook on the Nifty is still bullish and traders are advised to follow a buy-on dips approach. Immediate support on the downside is now placed around the 17,200 zone.
Expectations of the week:
As the results season nears its last leg and in the absence of any major macroeconomic events, D-street will focus on the macro trends.
The FIIs have been on a buying spree and have bought over INR 18,500 crore so far in August. The continuous FII buying has been a major contributor to the current rally. The market will have its keen eye on this trend as any reversal could result in a temporary hiccup.
The brent crude rates have been encouraging as it trades at a six-month low at around USD 93.65 amid recessionary concerns. The markets will try to de-code the future movements of the same. Nifty50 closed the week at 17,758.45, up by 0.34%.

Investing Idea for the Next 25 Years

India is set to celebrate 75 years of Independence on Monday. This would not have been possible without the martyrs who valiantly fought four wars and countless aggressions by enemy forces.

Defence industries have also played a crucial role in the security of our nation. There is an increased focus on the modernisation of the Indian armed forces as hostilities increase around the world.

Currently, India is positioned as the third largest military spender in the world. The defence needs are largely being serviced by imports. In order to advance and support the domestic defence industries, our defence budget is consistently rising in absolute terms and also as a percentage of GDP.

In a move to reduce our dependency on imports and be the catalyst for Atmanirbhar Bharat Initiative, the Ministry of Defence has been allocated a total budget of Rs. 5.25 lakh crores in 2022-23. This is 13.31% of the total budget for FY23. This is an increase of Rs. 46,970 crores (9.82%) compared to FY22. Total allocation for capital expenditure is raised to Rs. 1.52 lakh crores. Of the capital expenditure budget, 68% is for domestic industries in the current year as against 58% in 2021-22.

This simply places a strong emphasis on the Indian defence ecosystem and opens the door for domestic companies to capitalise on the opportunity.

Further, the increased limit of FDI to 74% has paved the way for foreign companies to invest in Indian defence manufacturing. This has enabled foreign companies to turn towards India for their manufacturing solutions and R&D. Moreover, it will also benefit domestic players since they will be exposed to cutting-edge technologies.

The government aims to achieve a turnover of US$ 25 billion including an export of US$ 5 billion in Aerospace and Defence goods and services by 2025. This shows the massive headroom for development in this space. Defence companies are bagging more orders with time. Increased orders will improve their return ratios and make their margin accretive.

In 2020-2021, 74% of contracts by the Army were awarded to Indian Vendors. Defence exports grew by 334% in the last five years with exports to over 75 countries.

This is the start of the upward journey for companies in this industry. The income statements are set to report high numbers while order books keep on growing. Investors should keep defence companies on their watch list as they will have healthy growth prospects even when India celebrates its 100th Independence Day.

Samco Family wishes you a Happy Independence Day!

Technical Outlook

Nifty inched higher in all four trading sessions of last week. Along with this, it has also ended higher for four consecutive weeks. The medium-term momentum is strong and favours the bulls. However, the hourly RSI has failed to keep pace with price and is displaying bearish divergence. It’s a signal that upward momentum may slow down in the immediate term. Short-term traders must lighten up some positions and wait for dips for an entry opportunity. Immediate term resistance is placed around 17,800 while 17,600 is good support.

Nifty50 Update 30 March 2022

Expectations for the week

Globally, markets are expected to react to the FOMC’s minutes that will be released next week. The Fed’s projection and discussion about inflation and recession will be the key monitorable. The market will also try to read between the lines about the roadmap of future rate hikes. Back home, the majority of India Inc.’s first-quarter results have been posted. The companies reported a mixed bag of numbers. Despite revenue growth, margins have been under pressure due to the unprecedented cost inflation across sectors. The balance of trade amount which is set to be announced next week could be another factor the domestic market will watch out for. The Nifty50 closed the week at 17,698.15, up by 1.73%.

Rally in USDINR is Running Out of Steam!

The risk in global markets has posed several challenges to the Indian rupee versus the US dollar. The Indian currency breached 80 dollar level last month. USDINR declined 6.14% on a year-to-date basis. Most of its emerging market peers have fallen even more.

Nifty50 Update 30 March 2022

The larger question on everyone’s mind is whether rupee will collapse any further. We believe that the rally could run out of steam soon.

The dollar enjoyed similar rally in 2018. It rallied from lows of INR 64.84 in April’18 to highs of INR 74.48 by October’18. This was a straight 7-month rally. However, in the 8th month, USD retreated back to INR 69.70 levels. A similar trend is being witnessed this year too. USD climbed consistently from the lows of INR 73.76 in January’22 to the highs of INR 80.21 in July’22.

Nifty50 Update 30 March 2022

From where we stand now, there seems to be a possibility of the dollar losing its sheen. Although one instance does not provide a strong case but there are other pointers too which suggests the same.

The Relative Strength Index (RSI) of USDINR also provides us with another valuable insight. When the RSI is above 70 the chances of dollar prices reversing are high. We have witnessed this seven times in the last 10 years. Currently, the RSI of USDINR is in the overbought zone and trading above 70. This indicates the possibility of depreciation in USD and an appreciation in INR.

Nifty50 Update 30 March 2022

In my past articles, I mentioned that the risk-to-reward ratio is very attractive for investing in India now. Keeping that in mind, Foreign Institutional Investors (FII) after a gap of consecutive 9 months turned net buyers in equities in July’22.

Nifty50 Update 30 March 2022

This bodes well for Indian markets as well as the currency. Healthy capital inflows by the FIIs will provide room for the rupee to strengthen against the dollar.

Given all of the indicators, the odds are stacked in favor of the INR, and the USD may top out soon…

Technical Outlook

Nifty ended the week with gains of 1.35% around 17,390. It seems like the bulls are running out of steam after a terrific rally from the bottom of the 15,200 level in June. Nifty is forming a bearish divergence with RSI on the hourly charts which indicates that the upward momentum is slowing. The index has faced resistance of around 17,500 throughout the week. This level is likely to act as a resistance in the coming week too. On the downside, 17,000 is likely to act as major support for the index.

Nifty50 Update 30 March 2022

Expectations for the week

The upcoming week is going to be eventful for investors with a slew of macroeconomic data releases. Market participants' attention would be drawn to the inflation figures for the United States and China, which are likely to have an impact on global markets.

Back home, the Indian CPI print will be a key domestic indicator that will provide insight into the state of the economy. Nifty 50 closed the week at 17,397.5, up by 1.39%.