What sensational did you miss this week?
India’s fuel demand reached its highest level in at least 24 years in Feb 2023: Petroleum Planning and Analysis Cell data.
US inflation (CPI) stood at 6% in Feb vs 6.4% in Jan. India’s retail inflation fell to 6.44% in Feb vs 6.52% in Jan. Wholesale inflation stood at 3.85% in Feb vs 4.73% in Jan.
What can you learn from this?
Sectoral Analysis of Petroleum and Fossil Fuel Refining and Distribution
Inflation and its relation to economy and stock markets
Upcoming IPOs:
Udayshivakumar Infra Limited IPO opens on 20.03.23 and closes on 23.03.23. The company is engaged in the business of the construction of roads, primarily in Karnataka. The company plans to utilize the Net Proceeds towards funding incremental working capital requirements and General corporate purposes.
Global Surfaces IPO was subscribed 12.21 times. Retail investors subscribed 5.12 times.
Video in Focus!
Big US Bank crashes down, Global economy under recession, Silicon Valley Bank CRASH, will Indian economy survive? Check now!
Market Outlook this coming week!
Nifty50 : This Week
Story of the Week: Is Silicon Valley Bank crash, repetition of Lehman Brothers crisis ?
To figure out whether both these crash are identical, we firstly need to understand how these two crisis actually happened.
SVB Crisis:
Silicon Valley Bank got bulk deposits during the Tech Boom of 2020 in and after the Covid pandemic. The bank however was unable to give out these deposits in loan, as the interest rates increased. So, the bank decided to invest these funds in Mortgage Backed Securities. Mortgage-backed securities (MBS) are investment products similar to bonds.
During 2022,when the interest rate started to increase and the bond prices started to fall. Since, the bank invested in long term bonds so the interest rate became very low and moreover the bond prices also fell drastically.
The clients of Silicon Valley Bank who deposited money in the bank, now wanted the money back as the tech funding had dried up. So the bank had to sell its bonds at a loss $1.8 Billion, as they faced a massive liquidity crunch. US authorities have transferred assets of the bank to a newly formed bank. Through this, they will try to give the money back to SVB customers and continue operations as a new bank.
Lehman Brothers Crisis:
Lehman Brothers collapsed due to housing loan crisis in the US. The mortgage-backed securities (MBS) that were mostly backed with subprime loans, many of which went into default. Moreover at that time the entire banking system of US was facing liquidity crunch.
The current SVB scenario is just limited to few individual banks. So, these are two completely different scenarios.
You Ask, We Deliver Section: Fundamental Analysis of SBI Bank
Requested by: Arun Sharma
SBI is the largest Indian Bank with 25% market share and serves over 45 crore customers through its vast network of over 22,000 branches and 62,617 ATMs. The bank has successfully diversified businesses through its various subsidiaries such as SBI General Insurance, SBI Life Insurance, SBI Mutual Fund, SBI Card, etc. It has global presence in 31 foreign countries.
- Lowest Cost To Income Ratio
The bank’s cost to income ratio is among the lowest in the industry, reflecting long-term operating efficiencies. This has led to rise in margins of the company.
- Drastic Fall In NPA
The Non performing assets of the company have fallen drastically.
3. Improvement in ROA and ROE
As the asset quality of the bank has improved with fall in NPA this led to rise in ROE and ROA of the bank.
Valuations
The company has been trading at very cheap valuations in comparison to the private banks.
Risk
The key risk here is that PSU banks market share is falling and private banks market share is increasing.
Looking to deepen your knowledge of the stock market? Check out the best certification courses for stock market online with certificate. Plus, get started with a free stock market course. Our “You Ask, We Deliver” section also offers a fundamental analysis of SBI Bank, requested by one of our readers, Arun Sharma.
Question of the Week #8
Replies with correct answers (within first 10 mins of receiving this newsletter), will get a shoutout from us…
PS: Don’t forget to share your Instagram handle too in the reply!
What are Bonds?
High Security Debt Instruments issued in primary markets, limited liquidity
Contracts for fixed return over investments done in secondary markets, very liquid
Answer to Week#7 was option 3: An ASM stock can be traded in the markets, but can’t be pledged, are subject to 5% circuit filter and are denied Intraday Leverages.
**Make sure you note your choices somewhere as we’ll covering the answers in our next issue…
Word of the week
Recession: Recession occurs when there is a period of reduced output and an increase in unemployment rate. It results in job losses and hardship on households and businesses is inflicted.
Bonus Tip: Manage your Portfolio yourself in this tough time!
If you’re invested in a stock for 3 years or lesser with average buying price more than that of the buying price at buy signal as per 200 Daily MA, then use the same MA to exit, keeping it as a SL.
