Good Morning Toasters!

In today’s issue of the Morning Toast, we discuss

• Berger Paints forms HH & HL pattern
• IPL Media rights go under the hammer
• News around the world
• An educational concept to keep you learning every day 🙂

Market Watch

Nifty: 17,206.65 | -69.65 (-0.40%)
FII Net Sold: INR 2,261.90 crore

Sensex: 57,683.59 | -149.38 (-0.26%)
DII Net Bought: INR 2,392.85 crore

Technical Setup

Berger Paints forms HH & HL pattern 🚀

• Analysing Berger Paints on a weekly time frame, indicates that the stock has been consolidating between 700-860 for over a year, thus making this an accumulation zone (see image below)
• Prices have made a good base around the demand zone (680-700) which increases the chances for reversal of trend (to an uptrend) around current levels, let’s zoom in and analyse the stock on a shorter time-frame

Okay great! Tell me more? Any more chart patterns? 

• On a daily frame (see image below), prices have been facing stiff resistance at 745 and taking support along 694
• After a correction, prices have made a double bottom pattern, a breakout above 745 might lead to a good up move (see image below)
• The 50-day SMA is around 745, a breakout above it might help in the trend change (for a swing trade)

That’s Great! How do I enter / exit such a setup?🤩

• A breakout above 745 (double bottom and 50-day SMA) might lead to a good up move. A trailing stop-loss can be set below the 50-day SMA (swing trade) to limit your losses

Interesting! Final thoughts?🧐

• On a weekly time frame, prices making a good base around the demand zone shows a positive bias
• On a daily time frame, prices making a double top pattern and continuous support at 694 increases the probability of the stock continuing its uptrend

Keep track?

Around the World 🌎

Some big names are making headlines – for some not-so-good reasons. What happened and what’s next?

• Tesla had previously alleged that the SEC was harassing CEO Musk over a tweet in 2018 that seemed to have misled investors but has received pushback from the Commission. The tweet in question involved taking the company private at $420 a share and had caused the stock to skyrocket. A fine of $40 m was levied since
• Famous activist investor Carl Icahn has launched a proxy fight for two board seats at McDonald’s with his top demand requiring suppliers to change their treatment of pigs. He is also holding the company accountable for a 2012 pledge that promised to achieve the same by 2022. McDonald’s has pushed back by accusing Icahn of not adopting similar commitments at other companies like Viskase Cos, where he is a majority shareholder
• Intel Co. seems also to be disappointing with warnings of gross margins falling into the 51-53% range in their third-quarter report. It is racing to catch up with its manufacturing technology while also building a new foundry business that produces chips designed by others. Things are looking good however with plenty of opportunities due to geopolitical instability and a global chip shortage. Investors have no choice but to wait it out now!

Industry News

IPL Media rights go under the hammer; What’s up and What do you need to know?

Background 

• BCCI”s golden child, and major cash cow, the Indian Premier League is due to a new set of broadcasters (hope SPN), with the last cycle having ended in 2021; the tender is expected to be released shortly
• Having included two new teams, which results in an increase in the total number of matches, the latest round of media rights are valued at INR 50,000 crore (by some estimates) for the following 3 year period, up from ~INR 17,000 crore in 2017 (won by Star India)
• Having seen the success, both from an ad & sponsorship revenue and new subscriber addition perspective to Disney + Hotstar, the number of bidders is expected to now include major players like Sony Zee, Amazon, Viacom 18 (which is owned by Reliance Industries), and erstwhile Disney + Hotstar
• To give you some context on the success, IPL viewership increased from 4.7 Million viewers in 2017 to 18.6 Mn in 2019; even during the pandemic years of 2020 / 21, Disney + Hostar recorded steady viewership of 9 Mn viewers

Give some numbers? 

• At its peak, Star India earned a revenue of INR 2,800 crore, in 2019, with average ten second slot for TV Ad rates costing ~15 Lakhs (up from 12 and 10 in the preceding years); eventually, the revenue gained from subscriber growth outweighed contribution by advertisement revenue
• During the entire first phase of IPL 2021 (29 matches), Star had disclosed 188 billion minutes of total watch time (14% higher than 2019) and a reach of 367 million viewers (astonishing numbers!!)
• Subscription strength is where it gets interesting, with India a unique market in the larger scheme of things; sport plays a huge role in increasing & more importantly maintaining the user count, case-in-point is Netflix, which has struggled to increase its base beyond the 5 Mn count
• In September 2020, Disney+Hotstar has ~18.5 Mn subscribers; following the IPL, the platform had added ~7.5 Mn subscribers; something similar was seen at rival Sony Liv, with their coverage of Euros 2020 and Olympics, positively impacting subscriber count

Damn nice! So, what’s next? 

• According to industry sources (🤷🏼), whether the 4 year period resulted in a net profit for Disney + Hotstar is questionable, although what is for certain is the headstart the property gave to their streaming platform
• There is a lack of clarity on the duration for the next contract, the number of teams to be added in ensuing editions, and if the rights will be split across digital & television, thus providing the likes of Amazon & Facebook a toe-hold into the property
• Sony + Zee (post their merger) are expected to double down their investment across their respective streaming platforms (Zee5 + Sony Liv), with any positive news likely to result in significant capital outlay, and consequent subscriber growth (track the stock?)
• Likewise, Viacom18, initially through an investment of ~INR 12,000 crores, via a stake sale to Uday Shankar (ex Disney + Hotstar CEO) & James Murdoch (Newscorp) and consequently via a strategic buildout of the Jio App, are expected to bid heavily for the property

Finally? 

• Between 2018 and 2023, Star India (now Disney) owned the properties to all three properties, IPL, BCCI and ICC – making it one of its kind acquisitions; the likelihood of that continuing is less, given the numbers we’re talking about
• What is for certain is the impact to public market equities, with any valuation of the new set of media rights, going to have a direct/indirect impact, think Sony + Zee, UNSP (owners of RCB), India Cements (owners of CSK), Viacom 18 (Reliance Industries)

What else caught our eye?👀

India getting connected in a big way 

• The NHAI has plans to roll out a Rs. 1 trillion programme to build > 5700 km of highways in over 117 districts
• The aim is to ‘quickly transform least-developed districts through the convergence of central and state schemes, the collaboration of central- and state-level officials, and monthly district rankings’
• The biggest beneficiaries include Uttar Pradesh, Jharkhand, Madhya Pradesh, Chhattisgarh, Maharashtra and Odisha while Gujarat, Telangana, Rajasthan will fall behind

India getting back to work

• Formal job creation in the country jumped by 16.4% in Dec’21 with 1.46m net new subscribers added to the Employees Provident Fund Organization (vs 1.25m added in Dec’20)
• A growth of 19.9% was recorded MoM; the highest number of enrollments were seen in the 22-25 years age bracket with female enrolment at 20.52% of the total net subscriber’s addition
• The ‘expert services’ category (manpower agencies, private security agencies, and small contractors, etc.) made up 40.24% of total subscriber addition

Educational Topic of the day

Backtesting

Backtesting is a process where a trader assesses how a strategy would have performed in the past. During backtesting, the trader follows strictly all strategy rules to get an objective view of the performance to see if something needs to be changed.