I welcome you all to this week’s top news regarding Investment, Economy & Personal Finance.
Fed to remain aggressive with Rates Hike!
Chairman Jerome Powell of the Federal Reserve suggested last week that the central bank may consider raising interest rates in 50-basis-point (0.5 percent) increments rather than the customary 25-basis-point increments in order to counteract the recent spike in inflation. This would expedite rate hikes, bringing the consequences of those increases forward.
He stated this because they feel that while the “US is now in a great position” (in terms of its labor market), “excessive inflation jeopardizes the country’s otherwise robust economic recovery.”
Powell also stated that the fighting in Ukraine has created a “supply shock that one would want to look through.” This indicates that the Fed believes it will be unable to contain inflation caused by disruptions in the supply of food and other raw commodities in Ukraine, as monetary measures normally affect demand rather than supply.
Invest in Companies with Pricing Power:
At first glance, inflation results in rising prices, which at first glance appears to benefit businesses by allowing them to increase prices and earn more money. However, it is not that straightforward. Certain businesses will lose clients as a result of pricing increases, while others will not.
Additionally, we must evaluate the business’s opposite side: how much corporations spend on the raw materials that go into their goods. The ability of a business to determine prices, both for goods and services, is referred to as “pricing power.” Pricing power is a critical component in determining how and how much inflation will affect a business. Thus, how can we ascertain the extent of its pricing power?
The scale of the business has a significant role in this. If a business is extraordinarily large, it will have greater negotiating power with its suppliers and will almost certainly be able to keep input prices down. On the other hand, smaller businesses may be forced to accept whatever they can obtain, implying that they have less influence over input costs.
If the corporation is also a supplier, its size enables it to have greater control over the pricing at which it sells its products. In general, the larger a firm is in the marketplace, the greater its pricing power and the less likely it is to be affected by inflation.
For Example; Hindustan Unilever Limited(Household and Personal care segment), ITC Ltd (Tobacco), Pidilite Ltd (Adhesives), etc.
Safeguard your Capital First!
When the picture becomes more uncertain and businesses begin to see expenses rise and margins contract, investors may begin to notice negative repercussions in their portfolios. Earnings projections and price goals may begin to decline if the economic picture deteriorates. Naturally, the question on everyone’s mind is: what can be done about it?
As Warren Buffett frequently states, the secret to his success is acquiring high-quality firms at a discount to their true value. How is this beneficial in certain circumstances? Essentially, when conditions are unclear, as they are now, the value of a corporation might begin to fluctuate as the future becomes more uncertain.
If you purchase a business for precisely what it is worth now, but the outlook and predictions deteriorate, driving the value lower, you risk incurring losses. That is why it is usually prudent to purchase a stock at a discount to its current value in order to build up a cushion for times like this.
The fundamental idea of investing is that you take on risk by purchasing a stock with the expectation that it will increase or decrease in value. By purchasing at a discount, particularly when the price is below fair value, you increase your chances of the stock’s increasing in value.
By purchasing below fair value, you also safeguard yourself against future developments that might diminish the value of the firm you are purchasing. The critical point, however, is that this strategy works only in the long run.
Stock prices fluctuate in the short term in response to current news and trends. Generally, the stock price does not move in response to fundamental changes in the business or its value.
Consider this: it is improbable that a company’s genuine worth will fluctuate by 10% in a single day, let alone numerous times a month. Thus, investing in equities for the long term and trading only when genuinely fundamental changes occur in the underlying firm is always the safest strategy to manage your portfolio.
India Growth Story Continues:
According to an S&P Global analysis, India is anticipated to be the fastest-expanding economy in the Asia-Pacific area in FY23. India’s GDP growth is expected to be 7.8 percent in the 2019 fiscal year, according to the rating agency. Meanwhile, Asia-Pacific economies are predicted to rise at a rate of 5.1 percent in 2022 and about 4.5 percent from 2023 to 2025.
Additionally, the survey warned that consumer inflation is a significant issue for India, as oil and other commodity prices continue to rise. India’s average consumer inflation, according to S&P Global, is expected to be 5.4 percent in FY23.
News for the Week:
- India expects a 9.2 percent GDP growth rate in FY22, the fastest growing in the world. Additionally, we saw a 22% increase in life expectancy. This was prompted by advancements in sanitation and literacy in the direction of cleanliness.
- Joyalukkas India, a leading jewelry brand, has filed a draught red herring prospectus (DRHP) with the market regulator, Securities, and Exchange Board of India (SEBI), for an initial public offering (IPO) of Rs 2,300 crore (IPO).
- Elon Musk stated in a tweet on Saturday that he is “seriously considering” developing a new social media platform. The entrepreneur behind Tesla and SpaceX stated that Twitter does not allow for free expression.
- Indian-born Raj Subramaniam has been named the CEO of US delivery company FedEx.
- Ukraine’s state-owned telecom operator, Ukrtelecom, said Monday that internet access was disrupted following a “significant” hack, according to Ukrainian government authorities and business representatives.
- According to Bains & Co research, 2021 was a record year for the Indian startup ecosystem, with venture capital (VC) investments reaching $38.5 billion—a 3.8x increase over 2020 and the inclusion of 44 new unicorns.
- Axis Bank, India’s third-largest private bank, will purchase Citibank’s retail banking unit in India, including its credit card business, for $1.6 billion in cash, months after Citi said it would close its consumer banking operations in 13 countries.
- Amazon India and Sun Mobility announced a partnership to extend the use of electric vehicles (EVs) equipped with battery swapping technology for the e-commerce giant’s transportation and logistics services. These EVs will help Amazon meet its ambition to add 10,000 electric vehicles to its Indian delivery fleet by 2025.
- Visa, the credit card company, introduced its NFT Creator initiative to aid small companies and artists. Through its creator program, Visa hopes to partner with many worldwide digital artists through its creator program, empowering them through blockchain technology and NFT commerce education.
- Substantial increases in India’s purchases of Russian oil might expose the Indian government to “significant risk” as the US prepares to tighten sanctions against Moscow for its invasion of Ukraine, a senior US administration source warned.
- Google is introducing a new “highly referenced” badge in its search results to help consumers find credible sources. The new label, which will be displayed in the Top Items carousel, is intended to assist readers in identifying stories that have received widespread coverage from other news organizations.
- In a written reply to a Rajya Sabha question, Piyush Goyal stated in a written reply that India’s 65,861 startups spread across 640 districts created an average of 11 jobs through March 14, 2022.
That’s all the major updates for the week. See you next Sunday. Until then, Work hard, stay safe, and most importantly… Always believe in India!
Week’s Website Articles & YouTube Videos:
YouTube link: 3 Simple Habits To Get Out of Poverty and Become Rich! #Habits
Website link: 10 Simple Habits to Overcome Poverty and Become Rich!
Website link: 10 Best Stock Screeners For Indian Investors!
YouTube link: Approach Stock Market with “SMART SIP!” How Does SIP Works? #SIP #StockMarket
Website link: Everything you need to know about Mutual Fund Investing:
Website link: Fixed Income Investments & Risks Involved:
YouTube link: What is a Mutual Fund? Beginners Guild to MF Investing via SIP - 2022 #MutualFund
YouTube link: Top 3 Sectors You Must Invest In Indian Stock Market - 2022! #Sector