Sunday, July 23, 2023
Welcome to The Weekly, where our team shares a few thoughts to take you into the week. This week’s thoughts have been brought to you by Sagar Lele, Founder of Rupeeting. He also manages the All-Weather portfolios.
Last week, the American and Indian markets have seen similar trends.
The US markets have rallied more than 40% since the beginning of this year. Over the last 9 trading sessions, the markets went up for 9 trading sessions, its longest green streak since September 2019. And then, driven by steep post-earnings fall in Tesla and Netflix, the markets fell by 2% overnight - the biggest one-day loss since March.
Tesla reported record deliveries and revenue, but its margins dropped to a four-year low. This coupled with Elon Musk hinting towards price cuts got investors worried, resulting in a 6% fall. Netflix added more subscribers than expected; but missed street expectations on revenue, thanks to price cuts and unfavourable foreign exchange rates, sending shares down 6%.
The Indian markets have gained 15% this financial year. The markets have been up for the last 6 sessions, and finally broke this winning streak with the Nifty falling by more than 200 points in a single day. The fall was driven by disappointing earnings reported by Infosys, Reliance Industries, and Hindustan Unilever.
In both the US and India, the rally this year has been driven by easing inflation, and a pause in rate hikes. However, with the tremendous rise seen this year, skeptics have started becoming louder.
For the US, the worry is around the sustenance of strength, especially given the quantum and pace of rate hikes being the highest-ever. For India, while there is no questioning on growth, valuations are tilting towards the higher end of the bracket.
But in either case, with aversion kicking in, any disappointment in earnings, especially in heavyweights has resulted in sharp downfalls, dragging the markets down. With the direction of monetary policy becoming fairly clear now, the markets are expected to be swung around by earnings over the next few weeks.
When we sat to research the topic for this week, we fondly reminisced the times when we’d visit the theatres or sit together and watch a movie on the television, only to be comically interrupted by a rather ambiguous ad of a brand selling music CDs or “experiences” or calendars or even bottled water, while the adults in the room shared smirks and glances.
Cut to our adulthood - the products that those brands actually sold came into the light, and for some, knocked their lights out! We’re obviously referring to the variety of products that has made India the 3rd largest alcoholic beverage market, the 9th largest consumer of alcohol, and the fastest growing alcoholic beverage market in the world!
Amongst the multitude of brands offering an even larger array of beverages to choose from, one company has done a fantastic job at being an absolute growth machine, giving its investors more than a 3x return in the past 5 years - Radico Khaitan.