Good Morning Toasters!

Hey! Happy weekend! Some respite from the markets, eh?? In today’s issue, we cover Reliance Industries, via a Technical Setup, with India’s highest market capitalisation company looking strong across multiple technical tools.

SBI Cards dropped their quarterly numbers, reporting strong YoY growth in PAT, with spends across Retail, Corporates are roaring back. The company’s facing increasing competition from ICICI / HDFC Bank, visible in market share losses.

We’ve started a rollout of our newest product, Trade:able, that aims to democratise trading, via a unique and fun learning experience. Click on this link to know more and be a part of the fam.

Market Watch

Nifty 50: 17,102.55 | -142.50 (-0.83%)
FII Net Sold: INR 3,648.30 crore

Sensex: 57,060.87 | -460.19 (-0.80%)
DII Net Bought: INR 3,490.30 crore

Technical Setup

Reliance to continue to break market capitalisation records? 👇

• Analyzing Reliance Industries on a weekly time frame indicates that the stock has been in a strong uptrend Making higher highs and higher lows. (see image below)
• The stock has given a breakout above its year long resistance (2750) after making a double bottom pattern

Great! Tell me more? Any moving average confirmations?

• Looking at the daily chart shows the stock has already given a breakout above its stiff resistance (2640-2690), has then subsequently retested breakout levels and is on the move
• Prices are currently trading above all 4 important moving averages (10 SMA, 20 SMA, 50 SMA, 200 SMA) which shows that buyers are in control

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

• As prices have given multiple breakouts on different time-frames, it is a good time to create a long position
• A stop-loss can be placed just below the 20-SMA (swing trade) or 50-SMA (positional trade) depending on your holding period

Interesting! Final thoughts?

• On a weekly time frame, prices breaking out of the double bottom and making higher highs and higher lows show positivity
• On a daily time frame, prices giving a breakout above key resistance and trading above all moving averages add strength

Keep a track?

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 🌎

• AMZN going through a tough time – Amazon posted its first quarterly loss in seven years (at $3.8 billion) caused majorly by a slump in online shopping, higher costs from inflation and supply-chain woes and market jitters over electric vehicle startups though revenue rose about 7% in the first quarter of the year. The pace of revenue growth was slower than expected as consumers returned to their pre-pandemic habits of shopping in person. Amazon is expected an operating income for the current quarter to be between a loss of $1 billion and a profit of $3 billion
• Airbnb supports WFH – Airbnb is allowing companies to work from home from any part of the world without a pay cut with the hope that other companies will follow suit and indirectly help their top line, as well as help the company retain top talent. Tax and other rules, however, prevent employees from working in countries where they don’t have legal residency but Airbnb is separately lobbying governments around the world to try to make it easier for travellers to work remotely for extended periods
• Elon selling Tesla to fund his own venture – Elon Musk is using his Tesla stock (~$4 billion) to fund his Twitter acquisition of $44 billion by selling 4.4 million shares at prices between around $870 and $1,000 a share and will be borrowing $12.5 billion from loans backed by more than $62.5 billion worth of Tesla shares that he owns. There are rules put up however that would require him to put up collateral if the price falls. Selling stock could weaken his hold over management at Tesla

Company News

SBI Cards records ~19% spends market share; what’s up and what do you need to know?

Financials

• SBI Cards reported a 231% YoY growth in PAT, recording INR 5.8 Bn in the bottom line, led by lower provisions (capital set-aside to manage delinquencies) and write-back of previous quarter overlay (buffer for wave 3 in Jan)
• The company recorded a 22% YoY growth in total revenue, touching INR 30 Bn, with major revenue from operations recorded across Interest Income and Fees and Commission Income (up 28% YoY)
• Overall asset quality improved (marginally) with Gross Non Performing Assets (GNPA) down 0.18% to 2.2%; the company’s Provision Coverage Ratio (PCR) was at 65%

Spends, Market Share, Partnerships, New Cards in Force (CIF), Customer Profile?

• The company added new Cards in Force to the tune of 1 Mn (for the second quarter running), now taking the overall CIF base to 13.8 Mn, which translates to ~19% market share, basis CIF
• The places SBI Cards as the third largest in terms of CIF, behind HDFC and ICICI Bank, who have also eked out some market share from SBI Cards, via aggressive partnerships
• Absolute spending grew 51% YoY to INR 54 Bn for the quarter, with Corporate spending leading the pack through 23% growth; the company recorded spend per card at INR 1.6 Lakhs (for the year), translating to INR 14k per month
• CIF distribution followed past trends, with ~45% of new cards sourced through SBI Branch Network, with the remainder acquired through Open Market; ~45% of new users were from Tier 1 cities, ~52% were b/w 31-45 age group and only 16% were self-employed
• Online spending with the retail category made up >50% of total spending, with pandemic hit sectors (travel, hotels, airline, entertainment) recording lower YoY growth, while Consumer Durables, Furnishing and Hardware recording strong online spending

Interesting! Tell me more? Going forward, valuations, stock performance?

• The credit cards industry is expected to witness a strong recovery in terms of spending, new customer accounts and asset quality recovery; reversing previous covid-19 buffers is going to add towards growth capital, which augurs well for cards players across
• SBI Cards stock is down ~23% on a 6M basis, and little lesser on shorter time-frames, with the stock down ~2% on results day
• Currently valued (richly vs global/local competitor) at 7x FY24 P / Adjusted BV or 29x FY23 P / E (x), the industry is currently awaiting RBI’s discussion paper on the Digi-payment space, with the risk of a possible reduction in MDR / APR (interest charges applied in the above mentioned revenue item)
• A change/reduction will likely have a long term bearing on SBI Cards, and other Digi-payment players (think: Paytm, Bajaj Finance)

Keep a track of RBI’s discussion paper on Digi-payment

What else caught our eye? 👀

Coal shortage hurting Delhi

• There might be an interruption in metro services and hospitals due to an increasing shortage of coal in the city
• Adding to it is the scorching summer which has triggered blackouts across many parts of the country as states struggle to manage the record demand for electricity
• The Power Minister has written to the Centre requesting it to ensure adequate coal availability to power plants that supply electricity to the national capital

Alc giants want a cut in foreign liquor taxes

• French spirits giant and Chivas Regal maker Pernod Ricard is lobbying for a drop in India’s high tax on imported liquor to make the drink more reachable to consumers
• They are proposing a drop to 0% in favour of free trade as opposed to the current rate of 150% which is one of the highest globally (kept mainly to increase gov revenue and check consumption)
• India’s alcohol market is said to be around $20 billion and will grow by 7% each year with whiskey being a key favourite

Results Preview (Nifty 200)

Saturday, 30th April: Yes Bank, IDFC First Bank

Monday, 2nd May: Alembic Pharma, Britannia Industries, HDFC, IDBI Bank, M&M Financial Services

Educational Topic of the day

Standard Deviation

Standard Deviation is the statistical measure of price volatility, measuring how widely prices are dispersed from the average price.

Dispersion is the difference between the actual price and the average price. Standard deviation is also a measure of volatility.

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