Bears return

Nifty50: 17,764 ▼ 89 (-0.5%)
Sensex: 60,506 ▼ 334 (-0.5%)

Hi there!

She came, she slayed. 

That’s how history is going to remember Beyoncé.

At Grammys 2023, ‘Queen bey’ broke all records of wins of all time with 32 awards. She won the Best Dance/ Electronic Album for Renaissance and Best R & B song for ‘Cuff it’.

A trailblazer and a trendsetter, Beyoncé Giselle Knowles-Carter, started off as a child artist before making it big in the world of pop. Beyoncé made her solo debut in 2003 with her first single “Crazy in Love”.

And 20 years later, she has won her 32nd Grammy — the highest by any artiste ever and there’s no stopping her. ‘Destiny’s child’ indeed!

From Grammy to gloomy, we don't like this transition too. But markets today gave us no other choice.

• The markets continue to witness sharp volatility 
• Of the Nifty50 universe, 34 stocks declined
• Strong dollar and US jobs data weighed on sentiments globally

Among the Nifty sectoral indices, Media (+0.7%) and FMCG (+0.5%) were the top gainers, while Metal (-2.2%) and IT (-0.6%) were the top losers.

What’s trending

⭐ P&G Q3 profit gets wings

In the December quarter, the vitamin, minerals and supplements maker’s (-1%) net profit rose 71% YoY to ₹76.8 crore. This rise in profit wa supported by portfolio premiumisation (focus on high margin products) and costs optimisation. 

⭐ Varun Beverages bubbles up 

The PepsiCo franchise bottling partner (+5.7%) reported a net profit of ₹81 crore, up 50% YoY in the December quarter. The management said that the strong recovery in demand post the pandemic and expansion of the distribution network resulted in a 41% growth in consolidated sales volume. 

⭐ Emami expects creamier margins 

The management of the fast moving consumer goods company (+0.9%) said it expects the margins or profitability to improve by 2%-3% in Q4FY23. Overall, it is targeting an EBITDA margin of 27% for FY23 as the raw material costs reduce.  

⭐ Voda-Idea zooms on equity conversion nod 

Shares of the telecom company (+20.4%) soared today. This comes after the government gave its approval to convert the telecom operator’s interest dues into equity. In return, the government will be issued shares worth around ₹16,000 crore at ₹10 per share. This is at a premium of 21% compared to today’s closing price. 

⭐ Adani prepays loans 

The promoters of Adani Group prepaid loans worth $1.1 billion to release pledged shares of its three companies – Adani Green (-5%), Adani Ports (+8.6%) and Adani Transmission (-10%).

In Focus

Taxing times for MFs?

On 1 February, India’s finance minister announced that the new tax regime, first rolled out in the Union Budget of 2020, will now be the ‘default’ tax regime. The new regime lowers tax outgo but doesn’t offer any deductions. Translated, it means that investing in financial instruments like equity linked saving schemes (ELSS) will no longer get you a tax break if you opt for the new tax regime. . 

As if on cue,, last week shares of HDFC AMC, UTI AMC and Nippon India AMC declined in the range of 3% to 6%. But, was the sell-off justified? Let’s find out

1. ELSS blip

ELSS has been a popular tax saving option because it offers investment in equities markets and has the lowest lock-in period (3 years) amongst tax saving instruments. Which is why AMC stocks have been slipping since B-day.

But if we look at the big picture, then it becomes clear that ELSS schemes account for just 4% of the total assets under management (AUM) of the MF industry, as of December 2022. ICYDK, the AUM is the total amount of money invested in mutual funds in India. In terms of the growth/equity oriented scheme category as well, ELSS accounts for only 10% of the total AUM. 

This is why industry experts do not expect a prolonged impact of the new tax regime on the overall MF inflows. 

2. SIP, SIP, SIP 

Also, mutual funds are considered as more than just tax saving instruments. For instance, despite the volatility in the Indian markets, retail investors have continued to pour money into MF schemes. The SIP monthly contributions have grown from ₹11,517 crore in January 2022 to ₹13,573 crore in December 2022.

In fact, the SIP AUM stands at 17% of the total industry AUM. It bodes well for the AMCs. This is because higher your investment in the fund,, higher is the fees earned by the mutual funds. FYI, mutual funds earn  income by charging you an expense fee for managing your money. This is charged as a percentage of your overall investment.

3. Rise of MF investors

Further, as more and more investors move away from traditional assets like fixed deposits and gold, (or financialisation of savings), they are gravitating towards mutual funds. MF folios (unique numbers for investment in mutual funds) breached 14 crore for the first time ever in December 2022. This means an annual growth of 17%. 

4. Unwavering faith   

It also seems like MF investors are maturing. In the September quarter, 54% of individual inventors held their equity investments for over 12 months, according to a ratings agency. This stickiness is a big positive for the MF industry as it helps the fund managers to provide robust returns over the long run.

While the new tax regime has triggered near-term hurdles, India’s asset managers seem to have multiple factors in their favour.

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What is net debt?

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