Good Morning Toasters!

Hii friends!! The Mid and Small-Cap Index snapped a three-day losing streak, with the headline index also arresting the brutal fall. The US FED’s decision on % of the rate will likely decide movements during the day. Most global economists expect a 75 Bps rate hike. Yikes!

In today’s issue, we go deep into the recently concluded IPL auctions, which have grown >190% since the last cycle was sold in 2018. BCCI has adopted a very American approach to distribution, onboarding multiple broadcasters in their quest to extract maximum value.

Nifty50 is at the crucial Support of 15,515 – 15,750, with India’s headline Index testing the level twice in the last week. Prices are oversold as trading is occurring near the lower end of a Bollinger Band.

And finally, we’ve started a rollout of our newest product, Trade:able, that aims to democratise trading, via a unique and fun learning experience. There are a bunch of amazing rewards and prizes to win. Click here to know more.

Market Watch

Nifty 50: 15,692.15 | -39.95 (-0.25%)
FII Net Sold: INR 3,531.15 crore

Sensex: 52,541.39 | -152.18 (-0.29%)
DII Net Bought: INR 2,588.00 crore

Industry News

IPL media rights reward all stakeholders; what’s up and what do you need to know?

• The BCCI aka big boss of Indian cricket, sold its marquee property, the Indian Premier League at a record profit, garnering INR 483.9 Bn in cumulative terms, representing a 196% growth vs sale of 2018-22 rights and translating to INR 1.4 Bn per match (the second-highest figure globally)
• Disney star (incumbent holder of TV + Digital Rights) bagged the TV, rights for a total of INR 235.8 Bn, while Viacom18 (Reliance Industries owned) won the digital rights for INR 205 Bn
• In a change of approach, with the 2018-22 rights sold as one (TV + Digital), the BCCI adopted a more American approach, creating different segments across TV, Digital, Overseas and Marquee Matches, to onboard a wider variety of broadcasters
• In an interesting turn of events, the cumulative figure for Digital Rights has for the first time ever exceeded the amount for TV rights in the Indian subcontinent, indicating the shift in overall consumption patterns

Damn!! Tell me more?

• The threefold increase in media rights auction is a definite boon for team owners, as an increased contribution will lead to significant revenue growth, without any incremental cost, thus leading to strong earnings
• Some listed players who are likely to benefit from IPL Media rights are Sun TV (Sunrisers Hyderabad), UNSP (Royal Challengers Bangalore), India Cements (Chennai Super Kings)
• Further analysis of each package-wise base price and winning bid (see image below) show an extremely high demand for the product, with digital rights winning bid ~52% higher than the base price
• And rightly so, globally Disney acquired ~33% of new subscribers via Hotstar (or IPL), while the product eventually led to >500+ Mn downloads and 46 Mn paid subscribers during the last cycle, comfortably making Disney+ Hotstar the largest OTT platform in the country

Nice! What else? All positives? Can you share some more numbers? And some more player analysis?

• That being said, it’s not all plain sailing though; while Disney+Hotstart acquired a large % of subscribers, from a business perspective they were unable to break even at the end of the 5-year cycle
• And thus along similar lines, Viacom will likely have to overhaul its back-end infrastructure and improve the interface, amongst other network-related costs, while giving its OTT platform Voot, a facelift (akin to Hotstar)
• From a TV rights perspective, incremental costs are likely to be limited, as DisneyStar has managed to retain the rights that it won five years ago, and would therefore have the entire infrastructure in place to continue as-is
• The Sony Zee combination has played it safe (we believe), as the significant extra investment required to execute a digital strategy, while net positive in terms of subscriber addition & digital facelift, would ultimately have resulted in a drag on cash flows

Okay! Final thoughts?

• The IPL is a marquee property (& cricket is king), with the Viacom18 acquisition of digital rights likely to form a bundle with the other Reliance Industries group company, Jio, which should help in subscriber acquisition and stickiness
• India Men’s & Women’s rights are due to go under the hammer in 2023, with Star India paying INR 601 Mn per match for that property in 2018, with all parties expecting a similar bidding process as the IPL (think: Sony + Zee bidding aggressively?)

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Around the World 🌎

• Is the end coming for crypto – Coinbase will be cutting down its workforce by 1100 employees or 18% citing reasons for a potential crypto recession while Celsius Network has hired a law firm to look into restructuring options and help with mounting financial problems. Approx $2 trillion of value has been erased since across numerous cryptocurrencies since November, and $BTC has fallen to < $21k which is  68% below its all-time high
• Inflation woes to continue – Amidst a broadening increase in consumer prices, investors seem to have retreated from government bonds with yields reaching their highest levels in more than a decade. Inflation is much higher than the central bank’s 2% target and may warrant another round of interest rate hikes. On Tuesday, the yield on the benchmark 10-year U.S. Treasury note settled at 3.482% (its highest close since April 2011)
• Cerebral trying to act smart – Mental health startup Cerebral Inc. is being investigated by the Federal Trade Commission on account of deceptive practices related to marketing of mental-health services. The main trigger was a program where they continued to bill customers a subscription fee until the customer cancelled. Many patients have struggled to cancel accounts or receive due refunds. The company is currently valued at $4.8 billion

Technical Setup

Will Nifty come out of this stagnation finally?!

• Analyzing the Nifty 50 on a weekly time frame indicates that the stock has been asking for support along a multi-week demand zone (15,515 – 15,750)
• As prices are trading close to an all-important support band, prices might reverse from current levels. If prices manage to give a weekly closing above the previous swing high of 16,800; nifty might see a good up move

Finally some good news for Nifty! Tell me more? Any moving confirmations?

• Looking at the daily time frame, prices appear to be undervalued (oversold) as they are trading close to the lower end of the Bollinger band (see image below)
• Nifty had given a huge gap (15,900 – 16,165) down 3 weeks prior. A reversal at current levels can result in this gap neighbour filled

Interesting! Final thoughts?

• On a weekly time frame, strong support zones and a high possibility of reversal give a positive indication
• Furthermore, prices being undervalued (or oversold) and a possible gap-filling adds strength

Keep a track?

What else caught our eye? 👀

Smaller wallets, smaller packs

• Due to rising input prices, every kg of packed consumer good sold in India  in February-April were 10% costlier than they were a year earlier
• The average package size meanwhile dropped nearly 15% reflecting attempts made by companies to cut product grammage to save on costs
• India’s WPI touched a record 15.88% in May (vs 15.08% in April) with FMCG volumes declining 1.1% YoY in the three months ended 30 April 2022

Air India has pulled up its socks

• Air India’s proposal to buy the entire equity share capital of low-cost carrier AirAsia India (where the group had an 83.67% stake) has been approved
• The move may help Air India salvage its aviation empire’ which as of now consists of three unprofitable carriers – Vistara, Air India, and AirAsia India
• The airlines will face some overlaps in their domestic passenger and cargo services along with charter flights though the competitive landscape will not be affected

Educational Topic of the day

Covered Call Strategy

A covered call strategy is an investing strategy that involves selling call options. It’s the right to buy against stock that you already own or have recently purchased to generate additional income from those shares. The option you sell is “covered,” because you own enough shares to cover the transaction as required by the option you’ve sold.

Edited by Raunak Karwa

Let’s connect, I always love hearing from you. Hit me up at Raunak_Karwa on Twitter or Raunak.karwa@finlearnacademy.com