Yesterday’s Market Performance
Nifty: 15834.40 I 112.20 (0.71%)
FII Sell Net: 338.43 CR
DAX: 15650.09 I 11.88 (0.08%)
Sensex: 52880.00 I 395.33 (0.75%)
DII Buy Net: 645.59 CR
FTSE: 7,164.91 I 41.64 (0.58%)
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In today’s issue, we discuss;
- D2C brands shaking the retail sector? We’ve all considered shopping from social media sometimes, right? Let’s talk stats now.
- Spooked FIIs turn net sellers, making India the second-highest FII outflow in Asia.
- ITD Cementation’s performance, other important financial news, and an educative concept to help you keep learning. Read along!
ITD Cementation: 87.90 | 5.05 (6.10%)
The stock jumped 6% after the company secured an order from Gujarat Metro Rail Corporation Limited for the development and construction of Dream City Depot including Metro Bhavan and associated electrical and mechanical works for the Surat Metro Rail Project, Phase-1.
CSB Bank: 357.15 | 9.15 (2.63%)
The share falls jumped 2% after Total provisional deposits in June quarter 2021 for the bank came in at Rs 18,652.80 crore, an increase of 14.17 percent YoY.
How Instagram Shoppers and D2C brands are changing the retail game?
- Since 2016, 600 D2C Brands had raised just USD 1.6 Billion between them; the pandemic has changed that; in 2021 alone, brands like Boat (USD 100 Million raised from Warburg) Juicy Chemistry, Sleepy Owl, Wakefit, and others have raised money to target a market pegged to touch USD 100 Billion by 2025.
Fuelled by the pandemic (with limited other options), smartphone penetration at an all-time high, and a changing customer preference, D2C brands have blossomed across sectors, ranging from beauty & skincare products, protein supplements, fast fashion, and coffee & tea.
The first wave of D2C products came into the system during the initial phase of e-commerce in India, between 2012-2014, and primarily reached the end customer through those channels (with the benefits & limitations).
On the back of greater innovation in the system (think: launch of Shopify & Delhivery), today D2C companies are able to build products (to sell), add digital storefronts, and manage delivery all under the same roof, massively helping in achieving scale.
Leveraging social media, with the option to target specifically and gain real-time customer insight & feedback has meant veering away from traditional marketing methods (not hiring celebrity brand ambassadors and running massive ad campaigns), allowing entrepreneurs to start small, gauge & learn and scale.
Woah! Tell me more? 🤔
India has a growing and upwardly mobile population, that is extremely globalized in its thought process (in-tune through multiple social media platforms), and with FMCG companies targeting price points and products for the mass markets, D2C has a free shot at a large section of the market, that’s remained untapped (think: Metro, Tier 1/2, Gen Z + Millennial, SmartPhone user).
With a more experimental focus on business (and limited overheads to worry about), D2C brands are leading the way when it comes to innovation; Marico recently acquired the Beard Grooming & Shaving Products company Beardo, allowing the FMCG major to enter the D2C space; Sleepy Owl identified a grossly underserved (or served in an archaic way) market of ready to use/use on the go coffee brews; Nykaa & Purplle legitimized the online selling of beauty care products, in addition to running influencer campaigns that have educated large % of Tier 2 / 3 population on correctly applying make-up / other beauty & skincare products.
Running digital campaigns, being extremely close to the customer’s thought process, and generating real-time feedback have allowed D2C brands to grow nimbly and build out a previously non-existent market.
Sweet! So, what’s the next step now?🤩
Currently, 90% of retail shopping is offline- so the game still lies in that space, regardless of the headways we’ve made across digital; if the scale is something a brand is after, the company is expected to adopt an omnichannel approach – direct, through marketplaces & going offline.
India has ~10-20 million Kirana stores that are still the first port of call and allow greater reach for manufacturers (in comparison to marketplaces).
With the pandemic easing out (for now?) and companies flush with capital, D2C brands are targeting offline distribution channels in 2021-22, including a newer target audience in the process.
FII turned net sellers over the last week, with India seeing the second-highest FII outflows in Asia 😮
- Tide’s changing? Foreign Portfolio Investors have been net sellers in 9 of the last 11 trading sessions, which could be indicative of a changing dynamic; FIIs have been net buyers all through January 2021 to May 21 (albeit at a decreasing pace) and how now turned consistent net sellers for the first time in as many months.
- In single stock futures, Retail Investors / Traders increased their net long position by another 44,000 contracts (now net long 1 Million Contracts), but at the other end of the spectrum, FIIs are now net short on Single Stock Contracts (increasing their net short position by 42,000 contracts, now net short in total by as many contracts).
- Pretty much all sectors saw outflows, with Healthcare being the one outlier (of course); Bank Nifty underperformed the Nifty, with certain Banking & Life-Insurance stocks dragging the index.
Woah! What’s changed? 🤨
- A strengthening Dollar (stronger dollar against the rupee lowers the value of the FPIs holding) against the rupee, accentuated by the hawkish (?) mood that permeated in last months Fed meeting has spooked the markets with a quicker than anticipated rate hike, thereby indicating an end to status quo and current market conditions.
- FII flows since the March 2020 sell-off (start of the pandemic) are close to decade high / peak, a changing Fed stance, and rich valuations (you interpret it as you may)- 1Yr Nifty Forward at 20.4x is at a 16-month high, could have changed the prevalent mood (irrespective of the growth prospects on offer).
- Increasing oil prices (single barrel is now USD 75, and growing), a GDP to Market Cap ratio of 115% is all pointing to a short-term reduction in FII flows, and no continuation of current market conditions (increased liquidity, across names).
- First to get impacted during market conditions like these include Small & Mid Caps (although this is open to interpretation).
What else caught our eye? 👀
Shapoorji Pallonji group to pledge the remainder of their holding in TATA Sons
- The Shapoorji Pallonji Group is looking to pledge its entire 18.37% stake in Tata Sons to raise funds to pay off some of the group’s debt- if the discussion with the lenders works out.
- As per the lawyers, the shareholding of SP Group in Tata Sons is worth Rs70,000 crore -Rs 80,000 crore.
- Struggling to fulfill their debt due to a pandemic that has jammed their cash flow, the group is looking to monetize assets across Eureka Forbes, Sterling & Wilson Solar, and Afcons Infrastructure.
Didi Chuxing asked to go off App Store for regulatory violations
- China’s cyberspace regulator has ordered the removal of the country’s ride-hailing app- Didi Chuxing from mobile app stores for violating the laws and regulations by collecting and using users’ personal information.
- The app ranks 2nd (after Uber) in the ride-hailing category in the world, and number 1 in the Chinese markets, with a ban on new customer addition directly impacting the stock price (4 days after the stock listed on the NYSE).
- The company has halted new user registration as of 3rd July and will continue to serve the global existing user base of 493 million.