Festive flows

Weekly update — 28 October 2020

Despite the fall today, we still think equity is running hot. While there is a push for a new stimulus deal before the elections, a deal remains elusive. Also, there is a pickup in cases across the globe — the seven-day average of daily new cases hit a new high in the US.

On the other hand, India announced plans for another round of stimulus through new infrastructure projects — this is expected to increase consumer demand by $10 bn. Economists point to the need for a higher stimulus, but with increasing inflation, there is little the government can do.

Also, recent changes to MSCI’s global indices could force inflows to the NIFTY (read here about this).

Despite this, global uncertainty (on flows) is still at large — consequently, we are not changing allocations.

Meanwhile, we will continue allocations to gold and rebalance back to your original allocations at a later stage.

Consumer sentiment remains mixed

TCS, Wipro, Mindtree, HCL and Infosys are rolling back their salary cuts, and they are even doing increments before the festive season — this bodes well for salaried IT folks

According to a report by CMS, retail spending rose by 12% in September driven by rural demand — durables and FMCG both, witnessed an uptick

E-commerce order volumes grew by 31% during July-September, compared to the same period last year — several brands have shifted focus to online channels and tier 2/ tier 3 cities

According to the global wealth report by Credit Suisse, wealth per adult in India rose by 0.7%, and household wealth rose by 1.6% during January-June this year — financial assets grew 4.3%, while non-financial assets were up only 1.0%

The Refinitiv Ipsos Primary Consumer Sentiment Index was down 0.3 % in October, thus far — we could see some modest pickup during the festive season

 

Bullish business sentiment ahead of the festive season

Nomura India Business Resumption Index reported a gradual improvement to 83.5 for the week ending 25 October, from 82.2 in the week before — this points to a production pickup ahead of the festive season

Chief executives of top consumer brands have seen their business operations normalise in the September quarter — though a revival was seen in overall operations, segments like food and essentials continue to drive growth as urban discretionary spending remains weak

CARE ratings project gross non-performing assets to increase to 11.0–11.5% by March 2021 as a result of pandemic induced loan restructuring — the rating agency expects lower-rated corporates, personal loans and loans already under moratorium to add to the pile of stressed assets.

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