The Wrap🌯 01 Oct 23 | A Sea of Mergers & Spin Offs
Your weekly digest of everything important in Indian Stock Market
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US 10Yr yields continue to rise, global macro pressures abound, Indian stocks resilient, market witnesses highest number of new listings in a week, a sea of special situation stocks to choose from
Last week, the market reacted to a hawkish US Fed commentary on further rate hikes in the coming months. Just one week before this announcement, Indian market witnessed its biggest single day sell off for the year.
In line with global trends, the Indian markets also displayed weakness and remained relatively stagnant throughout the entire previous week.
However, things look promising this week.
While strong and weak stocks experienced a sell off together, the strong ones, in particular, have rebounded again.
Below are percentage of strong stocks in each industry. Notice how these percentages for a few sectors have rebounded back to the levels they were just two weeks ago.
Power, Metals, Defence, Auto, BFSI, PSUs, Real Estate and Pharma - these seem to be the strongest sectors so far and quickest to rebound while Railways seem to be undergoing profit booking.
Global macro indicators (Dollar Index, US Treasury Yields and Oil) continue to indicate caution but India specific macro indicators are behaving the opposite.
Take for example this comparison of yields on US 10 year bonds and Indian 10 year bonds.
Ideally, these indicators should exhibit a high degree of correlation, but thus far, they seem to be moving in opposite directions. Most prolific US fund managers are betting the US 10Y yields will rise higher (see Bill Ackman interview in curated section).
It's not all smooth sailing for the Indian market.
Certain segments are showing clear signs of excess.
Consider this stat: sixteen new company listings took place this week, marking the highest weekly number for this year so far. Out of these sixteen, twelve, or 75%, belong to the microcap and SME category. You will find information on all these sixteen companies under the ‘New Listings’ section, towards the end of this newsletter.
There maybe some more turbulence ahead. The US Government is on the verge of shutdown (yet again!), as the US Congress cannot agree on raising the US debt ceiling (yet again!).
While this happens all too frequently and negotiations are made at at the last minute - this time its highly likely that US Govt will actually shut down for days or even weeks.
How does that impact the market? Well, for one thing, the data that US Fed relies upon to decide the interest rates and the global market tracks - that data will no longer be available. So in essence, the Fed and markets, in general will be flying blind - which isn’t great and tend to further derail market sentiment.
Finally, in terms of sectors within India - PSUs, Real Estate, Small caps and Pharma were the strongest performers this week.
You will find more commentary on Real Estate sector under the Corporate Announcement section of this newsletter.
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