The Weekly Stack 15th to 21st July

22 Jul, 20233 mins read
The Weekly Stack 15th to 21st July

Hey there!

📺 Are OTTs in India falling behind?

🏦 Are mutual funds holding too much cash?

🤯 Infosys earnings shocked the nation!

Read Time: 4 mins

1. Major ripples in OTT industry

 Major ripples in OTT industry
Major ripples in OTT industry

Netflix Cracks Down on Password Sharing

The company is now requiring users to verify their accounts with a code sent to their email or phone number. If users are caught sharing their passwords, they may have their accounts suspended. This is an effort to boost revenue growth in countries like India.

Disney May Sell Star India

The Walt Disney Company is reportedly considering selling its Indian broadcasting business, Star India. The company has been facing increasing competition from local rivals, and the sale could generate billions of dollars.

OTT Industry in India: Can it Survive Free Models?

The Indian OTT industry is growing rapidly, but it faces challenges from the availability of free content. To survive, OTT platforms need to focus on value-conscious viewers, offer compelling and exclusive content, and adopt diversified revenue streams.

Our Opinion: OTT content providers in India have long been struggling to find effective ways of monetizing their content. JIO made a big slash last year with streaming of 2022 World Cup, adding to more pressure on existing OTT players. It is likely that there will be a series of M&A deals in this space as existing mid sized incumbents ultimately opt to merge with entities with deep pockets to survive in this competitive business.

2. MFs Hoarding Cash

MFs Hoarding Cash
MFs Hoarding Cash

More cash than usual

Data from AMFI shows that the average cash holding of equity funds has increased from 3.5% to 4.5% & debt funds from 10.5% to 11.5% from March to May 2023. Only three fund houses namely, PPFAS Mutual Fund, Quant Mutual Fund, and WhiteOak Capital Mutual Fund hold over 10% in cash. (See table for details)

A sign of caution perhaps

Clearly, the mutual funds are proceeding very cautiously in the current market scenario. However, the cash component is not worryingly high. Many mutual funds had held cash in large percentages during the previous highs in the market. It is not the case now. Most fund houses believe that the Indian market is poised to grow in the coming years and the growth prospects are appealing.

Our Opinion: Higher cash levels at some of the popular mutual funds could have a number of implications for investors, including lower returns, increased risk, and delayed gains. There are a few reasons why mutual funds might be holding more cash - they are expecting volatility in the markets and want to have a buffer or they are waiting for attractive investment opportunities to emerge.

3. Infosys Q1 Results Shock Market Expectations

Infosys Q1 Results Shock Market Expectations
Infosys Q1 Results Shock Market Expectations

Revenue Guidance Revised sharply down to 1-3.5%

Infosys reported its Q1 FY24 results on July 20, 2023. The company's net profit increased 11% YoY to Rs 5,945 crore, while its revenue grew 10% YoY to Rs 37,933 crore.

Infosys also revised its revenue guidance for FY24 to 1-3.5%, sharply down from 4-7%. The company cited a number of factors for the revision, including the ongoing war in Ukraine, rising inflation, and a slowdown in global economic growth.

Outlook Remains Positive

Despite the revision to its revenue guidance, Infosys's outlook remains positive. The company said that it is seeing strong demand for its services from clients in the banking and financial services, retail, and manufacturing sectors

Our Opinion: The IT industry is still not out of the woods post the peak in deals and hiring boom witnessed in 2021/2022. There is likely to be at least a few more quarters of pain left before things settle down and the next wave of growth starts to seep into the IT industry again. The good news is that IT Companies will now get a significant respite from the surging wage inflation witnessed in the past couple of years.

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