Expert Analysis of the Global Macro Events & News affecting the Indian Markets
WEEKLY MARKET SYNOPSIS
| Index | 1 week | 1 month | 1 year | 5 years |
| Nifty 50 | 0.17% | 5.08% | 18.82% | 75.33% |
| BSE Midcap | 0.23% | 5.2% | 26.55% | 87.61% |
| S&P 500 | 0.31% | 5.51% | 16.49% | 62.03% |
| Nasdaq | -1.81% | 6.06% | 22.33% | 82.81% |
Barbenheimer: The Entertainment Business in Discussion
I’ve been trying to watch Barbie and Oppenheimer on the same day since they released but juggling work hasn’t allowed that yet. So, after days of permutations and combinations to get the right timings and best price, I’ll finally watch them this Saturday. Now, why am I telling you this? Well, this week we are discussing the double feature. Don’t worry this is not another movie review or a comparison. This is a business review.
Today we are discussing the movies Barbie and Oppenheimer and their effect on the entertainment sector. Let’s get into it.
Entertainment Sector’s Ticket to Revival?
Let’s take a walk back to 2020 when Covid-19 shut down theatres and the entertainment industry completely tanked. With the emergence of OTT, theatres have been struggling to keep their doors open despite many big releases over the last couple of years. Cut to today, viewers are happy to pay more than a thousand bucks to watch Barbenheimer. Theatres are running shows continuously for 24 hours, the halls are booked to their maximum capacity, viewers are dressing in pink and black for the movies, and it’s been the best weekend for cinema in terms of revenue. This is entertainment’s first big break since covid.
What’s been stopping the industry?
A fair number of movies with big names like Salman Khan’s Sabka Bhai Sabki Jaan, Shahrukh Khan and Deepika Padukone’s Pathan, and more have released but the box offices didn’t see much light. Big budget movies costing north of 500 cr rupees like Adipurush released, and yet the theatres were disappointed. As an industry expert suggested, this happened due to lack of good content. OTT has changed the choices of viewers and they no longer go for just big stars. But now, two Hollywood movies have changed this for India and the world.
Barbie, giving a direct take on patriarchy in modern society through a beloved childhood toy and Oppenheimer, the story of the world’s first atomic bomb, have stirred up theatre enthusiasts in all of us as we run to the movies. With a collection of 80 cr rupees in India and 525 million dollars worldwide, Barbenheimer is breaking records.
Entertainment and Economy
Whenever we talk about a country’s growth, we talk about sectors like oil, food, power, manufacturing and more. Entertainment is probably the last one to be talked about, but, let’s not forget it’s the twenty-first century. It’s not been very long since the entertainment sector has started gaining traction. You must have heard of big budget films with their production costs being hundreds of million dollars. But did you know that media and entertainment in India itself is a two trillion rupees industry!
Entertainment, just like any other industry, also works in a tandem. It contributes to advertisement, tourism and hospitality, and employs about 5-6 million people in India itself. Not just this, it is expected to grow significantly from here.
Here’s something super interesting. The American singer and song-writer Taylor Swift is being invited by many South American countries to hold concerts. Her concerts are a huge sensation. Political figures like the Canadian and Thai PMs, and leaders from many other nations have personally invited Taylor to perform in their country. Here’s why. Her concerts contribute about 4 million dollars worth to the economy as they boost local businesses and travel exponentially.
We can now see how entertainment and media too can contribute to a company’s economy.
The share prices of PVR INOX dropped from Rs. 2038 on Feb 14, 2020 to Rs 834 on May 22, 2020. Less than half in merely two months. Even though it saw some shine during July 22, the overall trend has not been very pleasing. Barbie, particularly, got extremely popular because of its marketing. There are no exact figures as of now, but numerous brands launched their Barbie collections to capitalise on the movie’s gains.
For the last one month, Barbenheimer has been in talks keeping theatres running. This might be just the push this industry needs, let’s see.
Our Response to Market Euphoria
We have witnessed a phenomenal rally. The rally has been pervasive across the markets from smallcaps to large caps. Three months ago, when we were asking investors to invest heavily, it was a time when all the gloom was being factored into the market with very little to almost no positivity.
Now 3 months later, we are seeing many companies in the indexes being priced at fair value and overall valuations becoming expensive. We have taken exits in some of our smallcase holdings and many of our PMS holdings. In the PMS we continue to sell some of our holdings in a staggered manner.
India’s long-term growth story couldn’t be more robust, and long-term investors are highly likely to generate wealth as they bet on the Indian economy’s performance: Resilient domestic demand, uprising middle class, an upcoming manufacturing powerhouse. Nonetheless, when we zoom in and look at it through a near to midterm lens, we expect a correction:
• We do not advise on adding more funds (buying stocks/index) at these levels.
• We recommend sitting on cash or allocating to liquid funds for a short while.
• Once a correction surfaces, or some of the uncertainties begin to fade, only then we would advise on investing further.
• We will make exits in smallcase if necessary. We recommend against selling everything and walking away from the markets.
• Avoid the fear of missing out – don’t try to chase the markets. Several new advisors and offers have surfaced offering higher returns without risk. Remember that there are no higher returns without higher risk. Be cautious!
A myriad of positive elements is being priced into the markets with very little negativity. Following are some of the negative factors that we believe are yet to be priced into the markets:
Fed interest rate hikes: Two more consecutive interest rates are expected from the current 5-5.25% band, and any more rate hikes would deter the US economy further, and foreign markets including India would feel the brunt.
Slowing export growth: Not just India, but China is also witnessing a slowdown in exports to the West. Besides the Fed, the Bank of England and European Central Bank continue to be hawkish (wanting to reduce liquidity in the system) and raise interest rates. This continues to impact demand for our exports and their overall economy.
Rise in Inflation: The sharp slowdown in inflation from 9% levels to 3% has been treated emphatically by the markets. We believe this is the calm before the storm. Unseasonal rainfall in India and Russia’s wheat export ban will contribute to food inflation domestically and abroad. This will further encourage the central banks to act.
2024 Elections: State elections of 4 key states, their impact on General Elections, and a deadlock in key decisions in the parliament will be factored into the markets very soon. And negative sentiments during this time will have a detrimental effect on the markets.
A Slowdown in the US and the EU: Private sector jobs, consumer confidence, business loan offtake, and manufacturing are falling as per the leading economic indicators coming out of these regions. This slowdown is yet to be priced into the markets.
Multi-period low VIX and record Margin Lending: As per the VIX index, the volatility being priced into the markets is extremely low, with around (3.5% change in the Nifty 50 with a 68% probability over the next month – at the time of writing this letter). Traders/investors buying stocks on margin have hit a record high as per the BSE/NSE data and this is never healthy.
To reiterate, we remain very bullish on the Indian economy, the future performance of markets, and our stocks. However, we foresee a much-needed correction in the markets, which we feel our investors can utilise to strengthen their portfolios!
CURRENT ECONOMIC EVENTS
| EVENT | DATE | SIGNIFICANCE |
Fed Interest Rate Decision | July 26 | The short term rate will be decided as the Federal Open Market Committee will vote on the interest rates directly affecting the securities market and currency. |
US GDP QoQ | July 27 | Gross Domestic Product is an important measure for a country’s economic development. This is released every month. A positive growth in GDP is a good indicator. |
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Green Portfolio is a SEBI Registered (SEBI Registration No. INH100008513) Research Analyst Firm. The research and reports express our opinions which we have based upon generally available public information, field research, inferences and deductions through are due diligence and analytical process. To the best our ability and belief, all information contained here is accurate and reliable, and has been obtained from public sources we believe to be accurate and reliable. We make no representation, express or implied, as to the accuracy, timeliness, or completeness of any such information or with regard to the results obtained from its use.
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