Pricing a new normal

Fortnightly update — August 30, 2020

We missed last week’s update, so here goes an update for the previous two.

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Markets last fortnight

Equity was up — NIFTY 50 and the Midcap 150 rallied 4.2% and 6.4% respectively. Continued news on potential vaccine production and gradual removal of lockdowns are the quoted reasons. But, we believe the money-glut is still at play; this month witnessed three significant spikes in FII inflows, while broad domestic flows were weak.

August 3 — China reported positive quarterly GDP numbers

August 11 — Russia announced its vaccine

August 17 — Trump called for another vaccine

We’ve been noticing this trend since April, and we don’t expect any significant changes yet.

Major shake-up in IT jobs

Tech companies in the US cut 134,000 IT jobs in July, marking the first month of job losses since the pandemic, according to a Forbes report

~200,000 IT jobs are at risk in India, according to Business Standard — do refer to our note that outlines key risks for salaried IT folks

Accenture announced that it would layoff 5% of its global staff — this could amount to 10,000 jobs in India alone

No changes in economic activity

GDP numbers (due next week) could come in ~20% lower compared to last year — we can expect some market volatility next week

Some isolated reports indicate a pickup in freight traffic across rail and road — however, they still point to a sluggish pickup since March

Consumer confidence slips again

Early August data points to a further fall in consumer confidence, according to Refinitiv-Ipsos report — the report indicates that only meaningful increase in jobs can reverse this trend

In real estate, Godrej Properties reported sales growth driven by NRI buyers, attractive financing and a digital process — a silver lining, but we still expect a sector-wide contraction of 40–60%

Allocation changes

No changes. Given the run-up with equity, the upcoming rebalance should even things out. Our piece on international markets should be out this week.