Stock Market Heat - Costly Oil & Commodities - FPIs Selling - Dent in FPS!

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Stock Market Heat - Costly Oil & Commodities - FPIs Selling - Dent in FPS!
By Rakshith Pai M • Issue #4 • View online
No:4 
Hi everyone,
I welcome you all to this week’s top news regarding Investment, Economy & Personal Finance. 
Construction is even more Difficult?
Significant increases in the pricing of critical raw materials have alarmed real estate developers, who are finding it difficult to pass on the additional costs to clients. Recent increases in crude oil prices are raising the prices of critical commodities such as steel, cement, aluminum, PVC, and tiles, which are said to have risen by 30–60 percent in the previous two years due to the global supply chain bottlenecks.
According to experts, if commodity inflation continues unabated, real estate developers may seek to increase the pricing of future launches by 10 to 15%. Additionally, developers are allegedly requesting a reduction in the GST rates on some building supplies like steel and cement.
Sunflower Oil getting costlier. But Why?
Sunflower oil prices have allegedly increased significantly throughout the majority of India as a result of supply chain interruptions caused by the Russia-Ukraine war. According to the Department of Consumer Affairs, the national average retail price of sunflower oil increased by more than 6% in the previous seven days to 166.33 per liter, and by more than 11% in the previous month.
In the past fiscal year, India purchased 2.2 million tonnes of sunflower oil. According to data published by the Ministry of Commerce, about 80% of that came from Ukraine. There have been ideas to raise the minimum support price (MSP) for edible oil in order to encourage more domestic production.
Equity Market Feeling the Heat.
In India, stagflationary patterns would emerge in the following months as a result of the supply shock. Persistent inflation would also wreak havoc on-demand and cause downtrading. Additionally, the continuance of supply chain problems increased competitiveness, and increased input inflation would require smart working capital management. In this setting, industry leaders with a superior brand and a financially rich balance sheet typically win market share. As such, investors should consider quality as a component worth investing in.
We feel that said, the next few days will provide an opportunity for investors to re-create their portfolios. Apart from the perennial issues of supply chain risk reduction (China plus) and import substitution, look for options that help balance inflation through pricing power and/or productivity. Pricing power may be demonstrated through brand recall, vertical integration, market dominance, and customer retention.
The IT industry will continue to underpin the productivity theme, followed by manufacturing automation and yield enhancement in chemicals, among other areas. For the China Plus theme, cost-efficient alternative manufacturers are a less important factor in determining client orders than quality and environmental compliance.
Additionally, domestically focused sectors/companies in agrochemicals (beneficiary of regular monsoon), pharmaceuticals (revival in acute treatments), and financials might be examined. Select financial equities should do better because, during periods of rising interest rates, assets often revalue quicker than liabilities, resulting in a wider interest rate spread.
While the equities market faces a steep wall of worry, investors should take a staged strategy to buy in this market, as saner regions of value are forming.
Buckle up for Hike in prices!
Commodity price increases put firms’ profitability under pressure. Companies with significant pricing power can increase their prices to safeguard their profit margins without adversely harming their market shares. 
Consistent compounders take it a step further; their incremental operational savings help to maintain profit margins while avoiding the need to increase production costs. The inability of competitors to replicate such operational savings bolsters Consistent Compounders’ competitive advantages and accelerates market share gains.
The conflict between Russia and Ukraine is likely to have a big impact on India, economists say, because rising global commodity prices could make it hard for people to spend money and slow down the country’s economic recovery.
FPIs are Selling Indian Equities! But Why?
Since October 20, 2021, foreign portfolio investors (FPIs) have been net sellers in the Indian markets. They reportedly sold Indian equities worth around $20 billion (1.5 lakh crore), far more than the $14.6 billion (1.1 lakh crore) they sold during the global financial crisis between January 2008 and March 2009.
Experts link the increasing selling to rising volatility and fear about the Russia-Ukraine crisis, which has pushed global commodity prices to record highs.
Dependency on Foreign Payment System
SWIFY which stands for Society for Worldwide Interbank Financial Telecommunications accounts for over 80% of global transactions. Other prominent include China’s “Cross-border Interbank Payment System (CIPS)”, Europes “Instrument in SUpport of Trade Exchanges (INSTEX) and our India’s “Structured Financial Messaging System (SFMS)” and others contribute the rest 20% of transactions.
While digital currencies such as Bitcoin have been around for some time, their lack of regulation and severe volatility exacerbate counter-party risks and they have generally remained unutilized in the organized sector.
For now, all the countries have no option but to rely on the US SWIFT. But, this has been changing. 
When it comes to domestic transactions in India, VISA and Mastercard controlled the payments business. With transaction fees of up to 5%, digital payments have been largely ignored by small enterprises, whose margins are already razor-thin. These are also the locations where transactional simplicity and credit availability are most needed.
Thanks to the Indian Government Digital push, Today the UPI and RuPay are now administered by the government. Both of them have contributed significantly to the cost-effectiveness, speed, security, and ease of payments. 
UPI, which is an excellent case study in and of itself, will soon be used outside India. All of these countries have either expressed interest in the idea or are at different stages of putting it into practice.
Depending only on international institutions like SWIFT, VISA, and Mastercard has risks. Payment networks are critically important because they have the ability to financially choke an entire nation, as we see now in Russia, and no one should let other people be gatekeepers to their own money.
News for the Week:
  1. Moody’s downgraded Russia’s credit rating to Ca, the second-lowest rung on its rating ladder. Citing central bank capital curbs, Moody’s said that these events are likely to restrict payments on the country’s foreign debt, resulting in default.
  2. According to Mercer’s 2021 India Total Remuneration Survey (TRS), women’s employment representation continues to improve, ranging between 20% and 30% across industries. Female representation at the entry-level was 43%.
  3. Google has announced its intention to acquire cybersecurity firm Mandiant for around $5.4 billion as part of an attempt to strengthen its cloud customer protection. The Mountain View, California-based search engine giant has agreed to pay $23 per share for the publicly traded company, which was launched in 2004.
  4. Russia has threatened to shut down a key gas pipeline to Germany and warned of $300 oil prices if the West continues to impose an export restriction on its resources. “It is self-evident that rejecting Russian oil would have disastrous effects on the world economy,” Russian Deputy Prime Minister Alexander Novak stated.
  5. McDonald’s, Coca-Cola, and Starbucks have joined the list of companies suspending operations in Russia in response to the invasion of Ukraine. McDonald’s announced the temporary closure of approximately 850 restaurants in Russia.
  6. Twitter has announced the introduction of a beta experiment for Twitter Shops, a tool that enables merchants to curate a collection of up to 50 goods for their Twitter identities. Up to 10,000 things may be included in the selection.
  7. In February, the US Consumer Price Index reached a new high of 7.9 percent, the highest level since 1982. Prices for gasoline, food and housing were the primary drivers of February price rises.
That’s all the major updates for the week. See you next Sunday at 10:00 am. Until then, Work hard, stay safe, and most importantly… Always believe in India!
Week’s Website Articles & YouTube Videos:
  1. YouTube link: Coffee Can Investing - My Top 5 Picks for Falling Market #RussiaUkraine
  2. YouTube link: 3 Simple Habits To Get Out of Poverty and Become Rich! #Habits
  3. YouTube link: What is Sukanya Samriddhi Yojana? Its Features & Benefits are explained. #SSY
  4. Website link: Sukanya Samriddhi Yojana Features, Benefits & Eligibility Criteria Explained:
  5. YouTube link: 3 Simple Habits To Get Out of Poverty and Become Rich! #Habits
  6. Website link: 10 Simple Habits to Overcome Poverty and Become Rich!
  7. Website link: 10 Best Stock Screeners For Indian Investors!

 

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Rakshith Pai M

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