[15 Oct 22] Newsletter: Outlier in focus, Market Overview, 5 Good Reads & More

🔆 Quick glance

• What’s up with markets: Crisp overview of markets & macros
• What we are reading: 5 good reads from across the globe
• What’s that outlier: A note on Butterfly Gandhimati Appliances
• What’s on YouTube: UPI is not killing toffees, Wipro woes & More

(Once you are through, please spend just 10 seconds to rate today’s newsletter on a scale of 5 – respond here)

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What’s up with markets? 🎯

Axis Bank is the top gainer from Nifty this week, joined by IT stocks, HCL Technologies and Infosys, which released better-than-expected quarterly earnings, and Sun Pharmaceuticals. Coal India is a top gainer for two consecutive weeks running.

Wipro’s earnings on the other hand were no bueno for the markets, as the stock tops the top losers’ chart this week, and is very close to almost halving year-to-date. Wipro is joined by SBI Life Insurance, ONGC, Asian Paints, and Adani Ports SEZ in the top losers category.

USDINR closed at ₹82.2, down by 0.2 percent, while crude fell 5% to ~$93. On a yearly basis, returns on Nifty are still negative at -0.9%, while gold is up 5.5%.

On valuations, price-to-earnings (PE) ratio for the Sensex was at 22.1, and there’s a graph below for historical comparison.

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What’s that Outlier?

Outliers is our in-house screening tool, that helps discover stocks with trends and momentum in their favor. This week, let’s check out one such stock that is India’s largest manufacturer of kitchen and electrical appliances company: Butterfly Gandhimati Appliances.

The company makes LPG stoves, mixer grinders, table-top wet grinders, pressure cookers, and non-stick cookware among other things in a 14,850 crores domestic market, under their decades old brand Butterfly.

The kitchen appliances industry (growing at ~10% a year) has retained its tilt toward unorganized players, but some big players have been able to take their fair share of the market–Hawkins, TTK Prestige, Stove Kraft, and the like. Butterfly Gandhimati itself has a ~11% market share in mixer grinders, a 5% share in pressure cookers, and a ~8% share in gas stove markets in India.

How do the numbers look?

Butterfly Gandhimati and Stove Kraft have grown faster, while TTK Prestige and Hawkins are more profitable.

You might be wondering what the buzz is about, considering there are arguably better plays on the peers’ list.

Here’s what happened

• Crompton Greaves Consumer Electricals bought a 55% stake from erstwhile promoters for ₹1,380 crores, valuing the company at ~2,500 crores.
• The market seems to be optimistic about 1) the new management put in by Crompton, and 2) the synergies this acquisition will provide Butterfly Gandhimati: access to Crompton’s strong distribution channels in northern and western parts of India, and their electrical goods stores across the country.

With that in mind, whether the company will hold its own in the intensely competitive industry remains to be seen.

Butterfly Gandhimati is one of many stocks that ranked Grade 10 on the Outliers platform this week.

(Disclaimer: The information conveyed in this post is intended for informational purposes and shouldn’t be considered as investment advice. Please do your own research before making investment decisions)

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What we are reading? 📝

• UK’s mini-budget last month put the country on a path similar to Japan of low inflation, low unemployment, and high budget deficits that amount to a Ponzi scheme. Read: Why Trussonomics cannot work
• Morgan Housel gives us a treasure trove of financial wisdom. Take a quick scroll through Little Rules About Big Things
• Bridgewater says ‘High inflation and an extremely tight labor market leave the Fed with little choice but to tighten until the economy and markets weaken.’ Read: The Fed Has to Keep Tightening Until Things Get Worse
• Insight into an amateur trader’s journey to successful financial blogging. Read – Almost didn’t happen
• How did the almost-centenarian Nomura, the financial services giant, start? Read: Legends Of Market History: Tokushichi Nomura II

(Please spend just 10 seconds to rate today’s newsletter on a scale of 5 – respond here)

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What’s on Youtube? 🎙

This week on Kya Lagta Hai Bazaar, Deepak and Krishna discuss the numbers coming in from IT companies, how Indian households save and borrow, and whether UPI is killing the toffee business.

Krishna shares his views on the cement sector, and why he thinks there’s consolidation coming among the players. Listen in!

(If you have questions you would like to ask us, do join in live on Fridays at 4.)

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