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In today’s issue, we discuss;

• US Fed Chairman’s view on growth, interest rates, inflation & liquidity and what impacts it has on India?
• Accenture US delivers strong, in-line Q4 numbers
• Jio winning the subscriber race
• And an educational concept to widen your horizon (not saying otherwise 🙈)  Read along!

Dish TV: 22.00 | +1.40 (+6.80%)

• The script zoomed 6% after Yes Bank sent notice to Dish TV to call for EGM for ouster of MD and Director Jawahar Lal Goel.

Vedanta: 293.10 | -6.50 (-2.17%)

• The script slumped over 2% after the firm announced its intention to delist its American depositary shares (ADSs) representing its equity shares from the NYSE and to terminate its ADS program.

Ahh it’s that time again; What’s the US Fed Chairman’s view on growth, interest rates, inflation & liquidity? And how does this impact India? 🙄

• The Federal Reserve is looking to pull back its massive stimulus program as early as November in order to control inflation risk.
• Nine officials on the Federal Open Market Committee anticipate an increase in the US rate next year, while the remaining nine are inclined more towards a later ‘lift-off’
• Jerome Powell (the Fed Chairman) has also hinted that they may conclude their asset purchases around the middle of next year.

Can we get some background, please?! 😏

• Post the Covid-19 outbreak the Fed had pledged to buy $120bn of Treasuries and mortgage-backed securities each month until it had seen “substantial further progress” towards average inflation of 2% and maximum employment.
• However, at a meeting on Wednesday, he said that “My own view is that the ‘substantial further progress’ test is all but met,” in reference to the employment levels.
• The proposal is to par the holdings by $10 billion and $5 billion a month (for treasuries and mortgage-backed securities respectively)

What’s the overall market sentiment then? 🤔

• The blue-chip S&P 500 was up 1% post the statement release with a major surge seen in Banking stocks of Bank of America, Goldman Sachs and JPMorgan.
• Bob Michele (Chief Investment Officer at JPMorgan Asset Management) said: “The economy is on the road to recovery .. given the inflationary pressures that are there and the concerns of the committee members, it’s time to start the normalization process and it begins with tapering.”
• In one of our earlier issues, we’d refer to a period in 2015 when the markets had misunderstood vague statement by the then-Fed Chairman pertaining to the buying program, and thus weakening in the process
• This time around, with clarity & a clear road-map, the market has taken the news positively, with local & global indices extremely strong (duh!, look at the Sensex bro)
• As a whole, the markets have been strong in the last couple of sessions, with the Sensex breaching the 60,000 mark & Nifty50 inching closer to 18,000 (damnn!!)

What’s the long-term situation look like? 🤓

• Compared to the June session, the Fed has increased its inflation predictions to 3.71% for 2021 and 2.3% for 2022. (Earlier this was 3% and 2.1%) while the employment rate is set to be steady at 4.8%
• From an India perspective, the Governor Mr. Das is bound to take cues from global reserve banks (Norway was the first country this week to raise rates), and with the US signaling an initiation towards scaling down (for lack of a better word), that effect is bound to percolate

Accenture US delivers strong, in-line Q4 numbers, providing a healthy read-through for Indian IT players; what’s up & what do you need to know? 🤩

Accenture Results

• The NYSE listed IT Consulting & Outsourcing giant, which follows a September to August financial year, delivered robust Q4 performance, with revenue rising 24% YoY (to USD 13.4 Bn) and coming in at the upper end of its guided range (USD 13.1 to 13.5 Bn)
• The company continues to gain market share, with broad-based demand across industries, services & geographies, leading to strong operating performance
• Accenture classifies its business lines across strategic priorities (Cloud, Interactive, Industry X & Security) and service lines (Strategy & Consulting, Technology and Operations) —
  • Consulting revenue grew 29% YoY (to USD 7.3 Bn)
  • Outsourcing revenue grew 19% YoY (to USD 6.1 Bn)
• The company recorded new order bookings to the tune of USD 15 Bn (with a healthy mix b/w consulting & outsourcing), adding 55,541 net employees during the quarter (what!?)

Earnings Call Takeaways – 

• The company believes the demand environment in FY22 will continue to remain strong, with the expectation that organizations are just getting started on multi-year digital transformation endeavors
• Forecasting high double-digit growth in Consulting & high single-digit / low double-digit growth in outsourcing, the company has provided similar growth guidance for the next financial year (12-15% in local currency terms

Interesting! What’s the read-through for Indian IT majors? 🧐

• A broad-based demand uptick and healthy order booking in the outsourcing business (high single-digit to low double-digit growth in FY22, on the back of 13% growth in FY21) augurs very well for Indian IT majors (think: TCS, Infy, HCL Tech & Tier two players alike)
• Guidance of 12-15% in local currency terms shows the demand uptick is likely to continue in the industry, with the outsourcing book moderating, yet remaining healthy at USD 7.1 Bn
• The Nifty IT Index rose ~30% / 41% / 86% in the last 3M / 6M / 12M vs 14% / 20% / 60% for Nifty50
• A strong demand environment (percolating through global commentary), sustained acceleration in revenue growth & operating performance and robust order booking will likely sustain lofty valuations (for a sector offering extremely attractive growth & return profiles)
• And the market reacted accordingly – IT Majors Infosys, HCL Tech, L&T Infotech, Wipro were all up, with the Nifty IT Index up ~287 points

What else caught our eye? 👀

Jio winning the subscriber race 

• Finally some good news for the industry as the VLR (Visitor Location register, a database that contains information about the subscribers roaming within a mobile switching centre’s location area, and used to track growth) subscriber base expanded by 4.6mn in July after two months of decline.
• Jio added 6.1mn subscribers and Bharti followed close with 2.3mn, but VIL lost 3.3mn subs (interestingly, VIL’s subscribe loss pace has slowed in comparison to earlier months)
• For Jio there was an equal distribution in terms of urban and rural additions, while for Bharti there was a rise in the urban base.
• These top two telecos will continue to gain market share by taking away Vi’s base as the latter cannot match them on their 4G Capex plans.

China is done with crypto (for good?)

• China’s central bank has made its stance very clear vis-a-vis crypto : all cryptocurrency-related transactions are illegal. (damn, that’s harsh)
• It has also said that it will ban global exchanges from servicing mainland investors and overall strengthen trading restrictions
• Bitcoin slipped by 5% while Ether and Doge slipped by 7% each.