Good Morning Toasters!

Ssup friends! Happy weekend and happy resting! In last week, the Nifty50 was down 1%, as the headline index respected a resistance band of 16200-300. The US recorded its highest CPI print in 41 years, with a >35% chance of a 75-100 bps rate hike at the next FED meeting. Yikes!

In today’s issue, we look at Engineering and Infra tendering and awarding activity in FY22, as private Capex grows strongly. Banking credit has helped, and strong awarding activity in Q1 was testament to that.

In global company news, Amazon recorded its strongest ever Prime day sale, with its live influencer-based sales clocking 100k orders per minute. Damn!!

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: 16,049.20 | +110.55 (+0.69%)
FII Net Sold: INR 1,649.36 crore

Sensex: 53,760.78 | +344.63 (+0.65%)
DII Net Bought: INR 1,059.46 crore

Industry News

Engineering & Infra orders galore

• Recording 78% growth in FY22, Engineering & Infra activity picked up strongly via a sharp increase in fresh announcements in both traditional sectors (steel, cement, petrochemicals and automobiles) and non-traditional sectors (electronics, e-vehicles, battery, data centre & solar power)
• A large part of the surge in fresh investment announcements has been from the private sector, with the share in the overall pie increasing from 40% in FY19 to 69% in FY22, indicating strong deployment of capital (banks have lent heavily last year)
• The strong tendering (or inviting to submit a bid) trend seen in FY22 has continued to Q1FY23 as well as April-June’22 tenders grew by 90% YoY (albeit low base due to Covid-19) and a 4 Yr CAGR of 13%
• While tendering as an activity improved in FY22, awarding of contracts suffered (for a variety of reasons) with the tendering to awarding conversion rate of 46%; this trend changed during the second half of Q1, with the ratio improving to ~60% as governments / private sector companies ramped up awarding of projects

Interesting! Share some details? Which sectors, banking credit involvement? And what about stocks??

• Among the sectors, Railways, Water & Irrigation and Power Equipment (Solar EPC) saw strong inflows in Apr-Jun’22, with growth in Railways driven by large wagon orders to Titagarh and Texmaco (Rs78bn and Rs65bn)
• Credit to industries has steadily risen in the last year, after being flat for some time, with industries/infrastructure growing by ~10%/~11% YoY, roads and Power at ~18% and ~9%, respectively
• An analysis of budget data of Top-20 states in the country suggests that capital expenditure will likely increase by 20% in FY23, albeit with the small disclaimer of states almost always over-promising and under-delivering (10% miss in the last couple of years)
• Likes of L&T, Action Construction Equipment (ACE), KEC, and HG Infra are direct beneficiaries of increased tendering (& awarding); from a margin perspective, reduced commodity prices across steel & other base metals should improve the bottom line (we believe)

If you’re interested in financial news & analysis, and wish to receive this email in your mailbox consistently, click here to Subscribe Now

Around the World 🌎

• China’s growth story stalled – China recorded a GDP growth of only 0.4 % growth in the second quarter of 2022, which was the worst since the first quarter of 2020 when the pandemic first erupted. It remains unlikely that situation will improve significantly post lockdown because of unemployment, slumping of real estate and recession in western economies
• Pinterest needs to pull up its socks – Activist investor Elliott Management Corp. has acquired a 9% stake in the highly popular social media company Pinterest which has been facing a lot of problems recently after a lot of top executives departed and business suffered after the easing of COVID restrictions. Shares, which have a market valuation of about $12 billion, are down around 50% YTD
• Celsius bearing the crypto slump – Celsius Network LLC has a big liability of $5.5 billion of which more than $ 4.7 billion is owed to its cryptocurrency users. It’s CEO Alex Mashinsky said that the cryptocurrency lender can partly repay its deficit by minting new bitcoins. He also said that the rumours led to more withdrawals which led to the company’s downfall

Global Company News

Amazon records its best ever Prime Day Sale

• The zon said its live streaming service, where you can shop with influencers helped make Prime Day 2022 its biggest one yet; during the two-day event, Amazon clocked in wait for it, 100 Mn views, as shoppers bought >300 Mn items (50 Mn more than last year) OR ~100k items per minute (damn Jeffrey, the customer is king right?)
• American households spent ~USD 145 on Prime Day, with the majority of items costing <USD 20 as discounts played their role in ensuring record high inflations didn’t deter buyers from purchasing Apple Watches, Levi’s Jeans and Pampers Diapers

While settling an EU Antitrust lawsuit

• In other news, Amazon has settled a long-drawn European Antitrust lawsuit, agreeing to not capture any third-party seller information anymore (think: revenue, shipments, inventory), allowing the Zon to peak into rival’s sales patterns and strategies
• The company has ~243,000 products across 45 different house brands as of 2020 and has been the source of controversy as it competes directly with other sellers (think: Cloudtail)
• Started in 2009, initially retailing electronic items, the private label business morphed into everything from vitamins and coffee to clothing and furniture, via brand names such as Amazon basics, Goodthreads and Solimo
• Failing to reach the initial target of ~10% of topline being generated via in-house brands, ultimately falling way short as the brands cumulatively contributed ~1% to the topline, the new CEO initiated a review resulting in a drastic reduction of the absolute # of products on offer in the last 6 months
• The US SEC, given such practices, are termed as anti-competitive in nature had taken note, launching a full-scale review early this year, eventually pushing Amazon to scale down their operations and accordingly realign priorities
• Amazon made USD 470 Bn in revenue last year (including the cash cow cloud business), so not peeking into third-party merchant data will probably not hamper the company too much (safe to say?)

What else caught our eye? 👀

Say goodbye to your next vacation

• From July 18, 2022, hotel accommodation priced up to Rs 1000 per day which was exempted till now, will be taxed at 12% which will make budget holidays more costly
• However, small-scale hoteliers will still not be covered under GST if their annual revenues are less than the taxable limit of Rs. 20 lakhs
• Though introduced to widen the tax base, it will increase the cost of end customers in this segment

Yes Bank has a new friend (?)

• Yes Bank has a distressed loan portfolio amounting to Rs 51,000 crore for which it had invited bids after the RBI rejected its plan to set up an ARC as its subsidiary
• Now, it has been decided that the JC Flowers ARC will be its base bidder for the transparent bidding process on a Swiss Challenge basis
• The bank, founded by Rana Kapoor, had to be bailed out by the State Bank of India two years ago

Results Preview:

Saturday, 16th July: BEL, HDFC Bank

Monday, 18th July: ICICI Pru Life

Educational Topic of the day

Butterfly Strategy

Butterfly Spread Option, also called butterfly option, is a neutral options strategy combining both bull and bear spreads together. A trader has to take positions in four different options contracts to implement this strategy. It’s often considered a neutral options strategy for traders who want a trade-off between profits and risks.

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