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Are We Headed For a US Recession?
Yash Upadhyaya
August 05, 2024
Tale of the Tape
Good evening everyone. Markets COLLAPSED today after US recession worries triggered a major selloff in Asia. PS - India’s ‘fear gauge’ jumped to a 9-year high. Yikes.
Nifty and Sensex plunged -2.7% each; the worst single day fall single the election results day. Midcaps (-4%) and Smallcaps (-4.7%) got absolutely KO-ed. 480 stocks out in the NSE 500 ended in the red.
It was a sea of red across sectors. Metals (-4.9%), Real Estate (-4.3%) and Auto (-3.9%) got beat up the most.
WTF is going on in the US and Japan and how will it affect Indian markets? Read our top story to understand the road ahead.
LIC Housing Finance, Bharat Forge and Cera Sanitaryware saw big movements today. Check out their charts below to find out why.
Gland Pharma was in focus after its Hyderabad plant was hit with three negative observations by the FDA.
Results reaction. Devyani International was up +1% after reporting +44% YoY topline growth in Q1. Meanwhile, Marico (+1%) also gained after its Q1 net profit saw a +9% YoY bump.
Power Finance Corporation (-5%) was down after reports said its independent directors red-flagged loans given to the SP Group.
Ceigall India IPO got oversubscribed 15x on the final day.
Here are the closing prints:
Nifty | 24,056 | -2.7% |
Sensex | 78,759 | -2.7% |
Bank Nifty | 50,092 | -2.5% |
Market
Ye Kya Hua? Kaise Hua? Kab Hua?
Global markets are having a MELTDOWN. Japan and the US are crashing hard, sending ripples across the world including India! The Nifty fell -3% intraday, the rupee hit a fresh record low and the India VIX jumped over 50% in the biggest single-day surge since August 2015! So why is everything unraveling and what should you be doing? Let’s get into it.
New economic data out of the US has spooked investors. Unemployment hit a 3-year high and manufacturing growth is weak AF. This has raised worries that the US is heading for recession. Experts have been predicting a slump for 2 years now, but we’ve escaped it so far. The risk still looks low, but Goldman Sachs has raised its probability of a 2025 recession to 25% (vs 15% earlier). FYI - even if the Federal Reserve cuts rates, it might be too late now! The US recession has been the main trigger for most markets. But there are also troubles with Japan.
ICYMI - Japan’s central bank has been raising interest rates to fight inflation, a slowing economy and an extremely weak yen. Well, they got what they wanted: the yen appreciated 10% in the last 3 weeks. The only problem? This isn’t great news for Japan or the US because a LOT of people used Japan’s negative interest rates + weak yen to invest in stocks around the world! Put simply: it’s like the US stabbed Japan with its recession worries and Japan stabbed the US back with its appreciating yen.
And finally, there’s India. We know what you’re thinking: all of it has nothing to do with us. That’s true, but only kinda. Nuvama believes India’s valuations are “at extremes” and that the next 5-year-returns are likely to be <5% CAGR. The brokerage says the current market cap to GDP ratio is 150%, a crazy high. The last time it was this high was back in 2007, just before the bubble burst.
TL;DR: India’s fundamentals remain intact, but a gloomy global economy picture is bad news for everyone. This could be the trigger that forces a correction in India, but we’ll need to wait and watch. Until then hold strong and buy the dip if we don’t bounce back!
What’s your market view? |
Specials
Vijay Kedia Portfolio Changes
Who doesn’t want to know which stocks legendary investor Vijay Kedia is currently holding? In this video, we cover his top holdings and latest portfolio updates along with fundamental and technical views on the same.
Charts
Chartbusters
Here are three companies that saw big movements today:
1) LIC Housing Finance slumped after reporting a disappointing Q1. While its bottomline was in line with estimates, its net interest income fell -10% YoY to Rs 1,989 cr. Margins were also down, while net NPAs were slightly up. A rough quarter overall.
2) Bharat Forge cracked -6% after its ‘Class 8’ truck orders from North America fell to a 15-month low in July. These truck orders were also down -5% compared to June’s sales, which were already low to begin with. Looks like the US slowdown may end up hitting the company’s exports.
3) Cera Sanitaryware was up +6% after it announced that it would buy back 1.08 lakh shares for a total of Rs 130 cr. FYI - what’s got investors excited is that the buyback price will be Rs 12,000 p/sh; +34% premium to its Friday closing price. The record date has been fixed as August 16.
Check out their charts below:
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