Good Morning Toasters!

Hiii friends! The joy lasted only a single day. FIIs went back to their OG ways. In such markets, either sideways or downward, as traders, you need to leverage all the different technical tools, in order to maintain that winning streak. A new facet of the markets opens up 🤷🏼

In today’s issue, we cover corporate development underway at HUL’s parent, Unilever which has just on-boarded noted Activist Investor, Nelson Peltz. Activist investors aka Bobby Axelrod from Billions normally take minority positions to significantly impact business decisions (for the better). Mr. Peltz has a similar background at other consumer goods organisations (P&G et al.)

The Economy is trudging along, just about we’d say. The RBI has further revised down GDP forecasts as Q4 numbers came in lower than expected, as manufacturing output slowed.

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: 16,522.75 | -61.80 (-0.37)
FII Net Sold: INR 1,930.16 crore

Sensex: 55,381.17 | -185.24 (-0.33%)
DII Net Bought: INR 984.11 crore

Global Company News

Unilever on-boards activist investors to reinvigorate growth; what’s up and what do you need to know?

• In a dramatic turn of events (not really 🤷🏼), the world’s largest marketing company has on-boarded noted activist investor (individuals who take on majority positions to enact business change), Nelson Peltz, to its board
• The Unilever Chairman indicated that the company has held ‘extensive and constructive discussions with Mr. Peltz on ways to reinvigorate growth across the company’s massive product portfolio
• Mr. Peltz’s fund which has a ~USD 1.6 Bn position in Unilever, making it one of the largest shareholders in the company has a history of taking positions in companies within the consumer-goods sector (more on this below)
• The move to appoint Mr. Peltz to the board has been initiated at the behest of Unilever’s two biggest shareholders, with the company lagging its peers in terms of sales, since the appointment of the new CEO in 2019

Interesting! Give some information on the activist investor? And how’s Unilever performed lately? (Great questions broo)

• Trian Fund Management (Nelson Peltz’s fund) previously won an expensive proxy battle to win a seat on Unilever’s numero uno competitor, P&G, with sales improving within a year of his appointment to the board, and the company posted its highest-ever quarter sales growth in decades, the recent quarterly results
• At P&G, Mr. Peltz set out to dismantle the bureaucracy that he credited with hobbling the company, while also increasing accountability for top-management
• In addition to positively impacting P&G, Mr. Peltz has also held similar positions/roles in companies including burger chain Wendy’s, Kraft Heinz Co., and Oreos maker Mondelez International
• Unilever has been struggling, from slowing sales to leaky shareholder returns and botching up a buyout of GSK’s consumer brands portfolio for USD 68 Bn, the company’s been lagging behind its competitors

Reaction to the appointment? And any potential India impact?

• Investors were enthused with the announcement, with Unilever stock reacting in the positive, and rising >9% in London trading, as Mr. Peltz comes with a reputation for enacting change and delivering results
• According to analysts, given the wide breadth of Unilever’s product portfolio, coupled with a presence in ~190 countries, some restructuring/downsizing of operations is expected as the company aims to become leaner to promote innovation and new product ideation
• India & Brazil are high contributing markets for the company, and any change at a global level is bound to impact the local operations of Hindustan Unilever

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Around the World 🌎

• No demand problems for Salesforce – Salesforce Inc. CRM 12.61%▲ posted a better-than-expected 24% increase in revenue (at  $7.41 billion, up from $5.96 billion) for Q1FY23. Though inflation and other economic concerns continue to persist, it expects second-quarter revenue of $7.69 billion. It reported earnings of 3 cents a share, in the three months through April 30 Shares (vs 50 cents a year earlier). Shares rose 7% in after-hours trading
• You can’t stop Russia -After sanctions were imposed by the U.S. and the European Union on Russia-originated oil, Russian traders are using various tactics – like concealing it in blended refined products, transferring it between ships at sea etc – to keep it flowing. India continues to remain a key hub, with imports skyrocketing to 800,000 barrels/day post-war (vs 30,000 barrels/day previously) due to the deep discount provided
• The Top Gun magic – “Top Gun: Maverick” provided some much-needed respite to the entertainment industry with a box office opening of $156 million in the U.S. and Canada over the long Memorial Day weekend. Hope continues to persist moviegoers will return to pre-pandemic habits, especially as movies like “Jurassic World Dominion, Minions: The Rise of Gru and Thor: Love and Thunder are slated for release

Economy News

Indian economy in turbulent waters; what’s up and what do you need to know?

• GDP growth rate for FY22 has been downgraded to 8.7% (from 8.9%) as Omicron and a low base effect slowed Q4 growth to 4.1%
• India’s growth is likely to slow down to  ~7.0% in FY23 due to a lack of private consumption (which got us our golden periods of 2003-07)
• The next level of secular growth seems to be missing (like most EMs) unlike in DMs where the revenue expenditure multipliers have been strong

Did we at least recover from the 2020 crisis?

• FY21 had seen a contraction of 6.6% (so yes we did well!) with agriculture remaining steady at 3.3% and trade, transport and communications being the only sector below pre-pandemic levels
• Industry grew at 10.3% (vs. -3.3% in FY21) and services too reversed the contraction with 8.4% in growth (vs. -7.8% in FY21)
• Private consumption and GFCF grew robust in FY22 on a low base, though government consumption was much lower (in contrast with the production side)
• Overall nominal GDP rose by a whopping 19.5% (vs. -1.4% in FY21) implying a deflator of ~10% in FY22

What’s the breakdown? Who did well?

• The industrial sector slowdown saw a GVA (Gross Value Added) growth of 3.9% for the quarter alongside other supply-chain disruptions and rising input costs which hit profitability
• Services slowed both in absolute numbers and in contribution to growth led by trade hotels and T&C mainly due to Omicron related curbs; agriculture growth rose 4.1%
• Private GVA growth remained steady (albeit low) at 3.2%; Private consumption was dismal, while government consumption and GFCF improved, and net exports remained a drag despite healthy prints

What’s next? Yes, we’re getting there!

• Urban demand is back on the rise, along with the absorption of labour, capacity utilization, and new investments
• There is an urgent need for policy support however due to the global price disruptions (thanks to the China slowdown, protracted shortage of critical inputs, and extended war in Europe)
• Effective fiscal policy impulse may be limited, and financial conditions led by monetary stance will only tighten ahead

What else caught our eye? 👀

Reliance’s new play into the toy business

• Reliance Brands Ltd (RBL) and Plastic Legno SPA have entered a joint venture pact wherein RBL will acquire a 40% stake in the latter’s toy manufacturing business in India
• Aims are two – vertical integration for the company’s toy business and helping diversify the supply chain with a long-term strategic interest in building toy manufacturing in India
• The venture will complement Reliance-owned Hamleys which has a commercial outreach of 15 countries with 213 doors and is India’s largest chain of toy stores

Say bye to coal

• Demand for power grew 23.5%  in May, and yet dependence on coal was reduced due to sufficient green energy output giving the hope that this is the solution to India’s recurring coal shortage
• The share of renewable energy sources in power output rose to 14.1% in May from 10.2% in April)
• Demand in the financial year to March 2023 is expected to grow at the fastest pace in at least 38 years

Educational Topic of the day

Continuation Pattern

A continuation pattern, commonly referenced in technical analysis, is a pattern that forms within a trend that generally signals a trend continuation. In contrast to reversal patterns, continuation patterns signal a temporary consolidation in the middle of a trend.

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