Markets last week
Equity was down last fortnight — (in increasing order) NIFTY was down 1.6%, NIFTY Midcap was down 3.0%, while the S&P 500 was down 4.8%. A meltdown across tech companies caused the fall in US markets — a lot of reports point to aggressive bets by Softbank as the likely cause. Higher uncertainty and higher prices are indicative of abnormal market activity — as noticed across US tech over the last few months. When a small sell-off begins with this uncertainty, it spirals to something bigger — compared to the S&P, the NASDAQ (which has a higher percentage of tech firms) was down over 9.1%. These movements triggered redemptions across Indian markets as well.
Positives in US jobs
The US reported that 1.4 million jobs were added in August (compared to 1.7 million in July) — a pleasant surprise, but the US has another 11 million jobs to claw back to pre-crisis levels
On the other hand, India lost 3.3 million salaried jobs in August — however, this comes lower than 4.8 million jobs lost in July
According to a ManpowerGlobal report, only 7% of Indian companies plan to increase payrolls in the last quarter of 2020
The UK could see major job losses in the next few months as the government’s furlough program comes to an end — reports point to half a million job losses by autumn
Business uncertainty may have peaked already
India reported a manufacturing PMI of 52 in August (above 50 for the first time in six months) — Services PMI was 41.8 (still below 50) but marked a significant gain from 34.2 in July
The Nomura India Business Resumption Index reported a gradual improvement to 77.4 in the first week in September, from 70 in mid-July
The Supreme Court extended the loan moratorium till the end of September — also existing loans will not be classified at NPAs for another 2 months
Improvements in consumer sentiment
According to the Retailer’s Association of India, August sales was 52% lower than last year — this number has been steadily increasing from 80% lower in May
Car sales were up 19% in August, compared to last year — though the result of pent-up demand, this increase looks likely to stay, supported by an increase in marketing spend (upcoming festive discounts and a slew of new product launches)
Isolated reports point to a pickup in the second-home market across NRIs and local buyers — locals are looking at cheaper homes along outskirts given the elongated work-from-home outlook and a fall in prices
No changes to allocations. During the last two weeks, we allocated to the S&P to capitalize on the fall (as mentioned above).