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Low base drives Q1FY22 GDP growth to 20.1%

India’s GDP growth for Q1FY22 accelerated to 20.1% on low base. The growth rate comes despite the drag caused by second wave of coronavirus which forced states to impose localized lockdowns. The 20.1% growth rate reported during the quarter that ended on June 30 is record growth rate, which came on the back of contrasting economic scenario seen during the previous year same quarter. The first quarter of FY2021 saw the economic activity in the country to come to a standstill due to nationwide lockdown imposed during significant period of the quarter – two of the three months to be precise. While the growth rate optically looks impressive, if looked through this contrasting scenario, it is very concerning.

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Will the economy recover?

As we complete Q2FY22 and the second wave of covid appears to pacifying, the battle on the macroeconomic front continues. While the damage to the public life was controlled last year by timely announcement of lockdown, the economy suffered with all leading macroeconomic indicators hitting all-time lows. But once the first wave started subsiding, economy bounced back sharply due to pent-up demand. But towards the end of fiscal 2021, as the second wave of surge in covid cases picked up, the grim state of India’s healthcare infrastructure came to the fore. Given the risks to the economy, government cannot afford for another full-fledged nation-wide lockdown as was done during last fiscal. It remains to be seen how economy fares in FY22 amid rising covid cases and deaths and announcement of fresh small lockdowns in various locations.

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What’s behind markets’ momentum?

Sensex took seven months to rally from 50000 on Jan 21 2021 to 56000 on Aug 18 2021. It rallied over 12% as it completed this journey. As the momentum in the Indian markets picked up, the pace with which Sensex captured new highs drastically came down. It took Sensex only four trading sessions to reach 56000 from 55000, the fastest 1000-point gain this year. During this period, investors’ wealth soared by 22% as average market cap of BSE listed companies reached Rs. 240.86 Tn on August 18, 2021 from Rs. 196.51 Tn on January 21 2021. After hitting 54900 on August 13, 2021, Sensex fresh record high in each of the last four trading sessions.

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Chip Shortage – How bad can it get?

Indian auto OEMs which got disrupted because of pandemic induced lockdown have put up a brave face and recovered sharply once the lockdown impact has subdued. But the resilience of the auto industry is under threat. The industry has been staring a severe supply side glitch in the form of global semi conductor shortage. So far the impact of semi conductor chip shortage has been visible in case of global auto OEMs. But with no improvement in the scenario, Indian auto OEMs are facing the heat and are forced to voice concerns explicitly. Companies like M&M, Tata Motors and Bharat Forge issued profit warnings in the coming quarters, attributing to shortage of the chips.

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No takers for government’s MSME subordinated debt scheme

Last year government announced Rs. 20,000 Cr Credit Guarantee Scheme for Subordinated Debt (CGSSD) for MSMEs. The scheme was announced as part of Atmanirbhar Bharat package announced to provide support and relief to various sectors severely hit by the lockdown induced by the pandemic. The CGSSD scheme was aimed at providing much-needed liquidity support for MSMEs which were sandwiched by lockdown related disruptions and dry liquidity scenario for them as banks were loathe to extend financing to these MSME amid fears of spike in NPAs in the event these MSMEs shut the shops. The scheme targeted to support nearly 2 lakh MSMEs that are stressed and NPAs on banks’ books as of April 30 2020. On the other hand, the scheme was also aimed at arresting spike in NPAs on banks’ books due to the pandemic. The eligibility criteria for the MSMEs opting for restructuring was set as per the RBI guidelines so as to avoid misuse by both banks and MSMEs.

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China’s clampdown on businesses rattles global markets

China’s clampdown on businesses rattles global markets The NASDAQ Golden Dragon China Index, which follows the 98 biggest US-listed Chinese stocks has corrected almost 15% in two trading sessions early this week. The index has corrected nearly 45% after hitting record high in February 2021. This saw around $770 Bn being wiped out in market cap during the last five months. This has been the biggest route for US-listed Chinese stocks since the 2008 financial crisis.

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The battle for Future continues

Two of the world’s richest men are fighting it out to buy out brick and mortar retail network of Future Group which is on the death bed. What’s at stake is strategic access to a network of popular chain of retail outlets across formats, which is expected to compliment their online presence and enhance presence across major cities. The situation is such that each one of them either wants to own it or prevent other from owning it. According to Forrester Research, Flipkart and Amazon rule India’s e-commerce space with a share of 31.9% and 31.2% respectively, while Mukesh Ambani is stooping to conquer the space through JioMart and a basket of related tuck in acquisitions he made in the recent past. It’s not strange that Ambani is vying to grab Future Retail as it would easily place him in the top league.

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Higher than expected IIP and flat CPI gives confidence

CPI-based retail inflation for the month of June 2021 came in flat at 6.26, which is below Bloomberg consensus expectation of 6.6%. Price data for June is more reliable and broad based when compared price data for May 2021 as the data was collected from 80% of markets when compared to 68% in May as lockdown restrictions eased in several states during last month. Among the components, food inflation slightly inched up to 5.2% vs 5.0% during May 2021. Fuel inflation rose to 12.7% from 11.9% due to rising global crude oil prices. While inflation in miscellaneous items came in flat at 7.3%, Clothing & Footwear rose to 6.2% from 5.3%.

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Banks stymie the recovery path:

Risk averse lenders are being the biggest hurdles of economic recovery from a downturn which was hit by the pandemic. Bank credit, the lifeline of the economic growth is growing at a anaemic pace. Bank credit to individuals and industries has been growing at the rate of 5.5-6% for the past 1-1.5 years. This is nearly half of the growth rate that was seen months before the pandemic struck the economy. This hesitancy from banks is due to the fear of incurring bad loans. RBI’s latest Financial Stability Report expects banks’ NPA ratio to rise to 9.8% by the end of this fiscal from 7.48% a year ago.

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Will the economy recover?

As we complete Q2FY22 and the second wave of covid appears to pacifying, the battle on the macroeconomic front continues. While the damage to the public life was controlled last year by timely announcement of lockdown, the economy suffered with all leading macroeconomic indicators hitting all-time lows. But once the first wave started subsiding, economy bounced back sharply due to pent-up demand. But towards the end of fiscal 2021, as the second wave of surge in covid cases picked up, the grim state of India’s healthcare infrastructure came to the fore. Given the risks to the economy, government cannot afford for another full-fledged nation-wide lockdown as was done during last fiscal. It remains to be seen how economy fares in FY22 amid rising covid cases and deaths and announcement of fresh small lockdowns in various locations.

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Global Markets retune to a hawkish Fed

Finally the Fed did what the world markets feared the most. In its MPC meet on June 16 2021, Fed adopted a hawkish stance by announcing that it expects to see at least two rate hikes before end of 2023, with the first hike coming in 2022. This sent global capital markets into tizzy as they believed it would be a déjà vu of taper tantrum. Equity markets across the globe which were hovering around record highs cracked big time as they were waiting for a trigger. After the unsettling, markets have now look to be retuned to the shift in Fed’s policy stance.Global Markets retune to a hawkish Fed Finally the Fed did what the world markets feared the most. In its MPC meet on June 16 2021, Fed adopted a hawkish stance by announcing that it expects to see at least two rate hikes before end of 2023, with the first hike coming in 2022. This sent global capital markets into tizzy as they believed it would be a déjà vu of taper tantrum. Equity markets across the globe which were hovering around record highs cracked big time as they were waiting for a trigger. After the unsettling, markets have now look to be retuned to the shift in Fed’s policy stance.

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Personal loans come to the rescue of credit growth

Systemic credit growth for April 2021 inched up marginally to 5.7% from 5.5% YoY growth reported in March 2021. Month-on-month the credit growth decelerated. Growth in food credit accelerated to 10.8% YoY driven by 11.3% YoY growth in credit to Agriculture and Allied activities. Industrial credit reported a sequential decline of -0.8% as credit to large industries is yet to pick up due to weak capex cycle and risk averse lenders. Services sector credit is yet to pick up, as key services are hit by the pandemic. Personal loan growth came to the rescue to support overall systemic credit growth, by growing 12.6% YoY. Personal loan growth was led by gold loans, vehicle loans and credit cards.

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Auto sales to slow down in the coming months

May 2021 was a washout month for Indian OEMs, which reported a sequential double digit de-growth in their volumes. However, it is noteworthy that MoM comparison is not meaningful during difficult circumstances induced by the pandemic. May 2021 was marked with a confluence of factors which resulted in dismal performance. Sharp spike in covid cases resulted in localised lockdowns. This coupled with shortage of oxygen and health risks to employees prompted many OEMs to prepone annual maintenance shutdowns to May, because of which OEMs remained shut for most of May 2021. Additionally, supply chain challenges including global shortage of semi-conductor and shut down of more than two-thirds of dealer network resulted in steep double digit decline in volume growth across players and segments.

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RBI maintains status quo

RBI’s Monetary Policy Committee (MPC) has concluded its three-day meeting on June 4 and decided to maintain status quo. RBI left key policy rates unchanged at record low levels. The policy announcement is the first after announcing intermediate relief measures on May 5, 2021, amid serious economic disruptions caused by the second wave of the pandemic. The MPC has also decided to continue with the accommodative stance as long as necessary to revive and sustain growth on a sustainable basis while ensuring that inflation remains within target range.

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Indian Equities: Improving returns potential for H2CY21

Fundamentally we seem to be ending H1CY21 on a neutral note. While fresh addition of cases seems to be steady at elevated levels, death toll is yet to stabilize. However, pace of recoveries, improving positivity rate, improvement in vaccine supply breathes in air of confidence. Based on the current position of technical and fundamental factors, neutral position of equities when looked at from perspective of cross-asset allocation and leading indicators are increasingly pointing to upside risks to index returns. Key pivots worth monitoring include the pace of deceleration of second wave, improvement in vaccine availability situation and noise around central bank liquidity support and valuation support.

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Credit Growth – Risks remain

Systemic credit growth in the economy has picked up finally and came in at 6.5%, highest in past 6 months. Non-food credit growth came in at 6.5% vs 5.7% YoY posted during Jan ’21. YTD bank credit growth has been picking up gradually from negative zone in the initial months of opening up of the economy to 3.3% in Fen 2021. Non-food credit growth picked up to 6.5% in Feb 2021 YoY vs growth of 5.7% recorded in Jan 2021. Industrial credit growth remained flattish in Feb 2021 but still remained in negative territory both for Feb 2021 and on YTD basis. YTD, industrial credit remained deep in negative zone.

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Second Wave hits Auto Volumes

Indian auto industry reports wholesale volumes for the month of April 2021 amid partial lockdowns, restricted movement for nearly half of April 2021 and surging covid cases across India. Just like last fiscal, the industry has started FY22 on a weak note. Nearly 1/3 of dealer network shut due to surging covid cases and lockdown restrictions and dealer network sitting on inventory days of nearly 45-50 days. While YoY growth numbers are not meaningful (NM) due to zero volumes in the corresponding month previous year due to lockdown, month-on-month growth is showing signs of weakness across segments. We expect the weakness to extend into the month of May as well as many OEMs have announced shutdowns citing variety of reasons including employee safety, annual maintenance shutdown, reduce consumption of oxygen to divert it to medical purposes and so on. We expect the weakness in volume growth to continue in the coming months until the second wave peaks out and supply shortages ease.

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Will FY21 be the year of equities?

Every investor wants to invest in the best investment options in such a way that he can achieve maximum return with minimal risk in a given tenure. The investment options that you choose should depend on your risk appetite, investment horizon, financial goals, investment objective, and liquidity needs. Historically, retail investors in India were exposed to very limited options including gold, real estate, equities, mutual funds, and fixed income products like bank FDs. Public Provident Fund (PPF), and Bank RDs. With the passage of time, thanks to financial engineering, investors today have a wide range of investment options including exchange-traded funds (ETFs), real estate investment trusts (REITs), and sovereign gold bonds. Given low financial literacy levels, a large section of the public switch in between fixed income products and equities depending on the euphoria in the markets Now that stock markets are at all-time highs and fixed deposit (FD) and recurring deposit (RD) interest rates are at low levels, it is advisable for investors to focus on equities. Because of declining returns, fixed income assets have become unprofitable and unattractive for risk[1]averse investors and retired employees - who rely on such products to get a steady income. In an environment of high inflation, such low returns on capital tend to undermine capital and thus the aces dwindle. Although volatility is consistent and unavoidable in equities, in this scenario equities can be considered as investment options provided investors tread carefully.

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Will FY21 be the year of equities?

Every investor wants to invest in the best investment options in such a way that he can achieve maximum return with minimal risk in a given tenure. The investment options that you choose should depend on your risk appetite, investment horizon, financial goals, investment objective, and liquidity needs. Historically, retail investors in India were exposed to very limited options including gold, real estate, equities, mutual funds, and fixed income products like bank FDs. Public Provident Fund (PPF), and Bank RDs. With the passage of time, thanks to financial engineering, investors today have a wide range of investment options including exchange-traded funds (ETFs), real estate investment trusts (REITs), and sovereign gold bonds. Given low financial literacy levels, a large section of the public switch in between fixed income products and equities depending on the euphoria in the markets Now that stock markets are at all-time highs and fixed deposit (FD) and recurring deposit (RD) interest rates are at low levels, it is advisable for investors to focus on equities. Because of declining returns, fixed income assets have become unprofitable and unattractive for risk[1]averse investors and retired employees - who rely on such products to get a steady income. In an environment of high inflation, such low returns on capital tend to undermine capital and thus the aces dwindle. Although volatility is consistent and unavoidable in equities, in this scenario equities can be considered as investment options provided investors tread carefully.

Karvy KSTREET - 138

Will FY21 be the year of equities?

Every investor wants to invest in the best investment options in such a way that he can achieve maximum return with minimal risk in a given tenure. The investment options that you choose should depend on your risk appetite, investment horizon, financial goals, investment objective, and liquidity needs. Historically, retail investors in India were exposed to very limited options including gold, real estate, equities, mutual funds, and fixed income products like bank FDs. Public Provident Fund (PPF), and Bank RDs. With the passage of time, thanks to financial engineering, investors today have a wide range of investment options including exchange-traded funds (ETFs), real estate investment trusts (REITs), and sovereign gold bonds. Given low financial literacy levels, a large section of the public switch in between fixed income products and equities depending on the euphoria in the markets Now that stock markets are at all-time highs and fixed deposit (FD) and recurring deposit (RD) interest rates are at low levels, it is advisable for investors to focus on equities. Because of declining returns, fixed income assets have become unprofitable and unattractive for risk[1]averse investors and retired employees - who rely on such products to get a steady income. In an environment of high inflation, such low returns on capital tend to undermine capital and thus the aces dwindle. Although volatility is consistent and unavoidable in equities, in this scenario equities can be considered as investment options provided investors tread carefully.

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Credit Growth

Highest in 6 months Systemic credit growth in the economy has picked up finally and came in at 6.5%, highest in past 6 months. Non-food credit growth too came in at 6.5% vs 5.7% YoY posted during Jan ’21. YTD bank credit growth has been picking up gradually from negative zone in the initial months of opening up of the economy to 3.3% in Fen 2021. Non-food credit growth too picked up to 6.5% in Feb 2021 YoY vs growth of 5.7% recorded in Jan 2021. Industrial credit growth remained flattish in Feb 2021 but still remained in negative territory both for Feb 2021 and on YTD basis. While a positive uptick in credit growth across the categories and industries is a positive development indeed, the big question to ask is will the uptick in credit growth sustain. The credit growth so far during the fiscal has picked up gradually in tandem with the opening up of the economy post lockdown. While the risk of second wave is looming as it poses risk to the credit growth going forward, expect to close FY21 with a credit growth of 3%-4%."

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FY21 Auto Volumes

Dent not as deep as expected Finally, the FY2021 has come to an end for the auto industry. The fiscal was unprecedented and memorable for many reasons, be it supply shortages or near zero growth for couple of months due to the pandemic and consequent lockdown. The year was challenging for the industry and has taken it back to more than 5 years. However, some players have ended the fiscal on a positive note for variety of reasons. The dent has been much lighter than expected at the start of the fiscal. This was possible due to factors including a) low base effect b) easy finance and low interest rates c) preference to personal mobility over public transport due to the pandemic and d)launch of new models increasing the range of new and affordable models across the segments. When it comes to March monthly volumes, all the segments reported robust growth due to base effect. The notable fact is that CVs continued to post growth in volumes.All the PV makers reported robust volume growth for the month of March 2021 on account of low base. Key notable trend is that the growth in SUV segment has continued to remain higher due to increased demand led by launch of new models and availability of easy finance. India’s largest car maker Maruti Suzuki reported a growth of 99% during the month of March 2021. YoY, Maruti’s sales growth was 1.5%. Maruti has been reporting high volume growth in the past few months driven by high growth in SUVs. For Maruti, growth has been due to demand for its successful models and preference for personal mobility, its sales volumes for mini segment is much higher than March 2019 units.

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Trading of currency futures on global exchanges - Benefits galore

Globalization has blurred the boundaries but constant and ever-increasing exposure of corporate and governments to foreign currencies have placed them at a constant exposure to foreign currency risk. The risks are more so in the case of currencies which are not fully convertible like the Indian rupee or Pakistani Rupee. Back in 2007, DGCX – Dubai Gold & Commodities Exchange took an initiative to list the futures contract of Indian Rupee vs. US Dollar and started a new chapter in the economic history of emerging countries. History is going to be repeated on 16th April 2021 when DGCX will launch Pakistani Rupee contract. Back in 2007, when Indian Rupee contract was launched at DGCX there were wide spread worries and concerns of introducing currency futures trading on global exchanges. There were worries that futures trading on global exchange would increase volatility as it would encourage speculation. There were expectations that this would lead to increased speculative activity and would keep things out of RBI’s control. However, research has showed that there is no clear evidence to suggest that currency futures result in enhancement of volatility in spot exchange market.

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Markets Rebound on Positive Global Cues

Benchmark indices bounced back and ended up more than1% each on positive global cues, positive US economic data and positive developments on vaccine rollout. Tata Steel, Tata Motors and Titan were top gainers with Power Grid and UPL being top losers Advance-Decline Ratio for the day stood at 43:6 and 1 stock unchanged. All sectors ended in green with Nifty Metal leading the gains with gains of 3.7%. While Media ended flat, Financials ended with gains of around 1% to 1.6%. While FMCG ended with gains of 1.8%, Auto gained 1.24%.

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Vehicle Scrappage Policy – A booster dose?

India’s automobile industry has several long-pending demands which have not been met despite being among largest providers of employment in the country. However, the government on Mat 18 announced vehicle scrappage policy, which has been a long -pending demand from the industry. While the vehicle scrappage policy has been in the works for long, it has been finally announced. As per the policy the fitness of the vehicle will be determined based on emission tests, braking, safety, equipment and many other tests as per the Central Motor Vehicles Rules, 1989. The government currently lacks basic infrastructure in the form of registered vehicle scrappging centres and automated fitness centres and it is encouraging setting up of such infrastructure through PPP model.Rules for fitness tests and scrapping centres would be applicable from Oct 1 2021 and scrapping of government and PSU vehicles which are older than 15 years would come into effect from April 1 2022. The mandatory fitness testing for HCVs would come into force from April 1 2023 and the same will be in place in phased manner for other categories from June 1 2024. The government with an object to encourage owners of age-old vehicles to dump the vehicles and discourage them to go for re-registration has increased the re-registration fees for vehicles older than 15 years. Such vehicles should be de-registered and scrapped and declared ‘End of Life Vehicle’ in case such vehicles fail to get fitness certificate.

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Credit Offtake remains sticky at 6%

Credit offtake in the economy has turned sticky and is growing around 6% levels for months now. Non-food credit too came in at 5.7% vs 8.5% during same period last year. YTD bank credit slowed down over previous year with gross bank credit growth coming in at 2.5% for FY21 vs 3.5% registered during same period i FY20. Credit to Agriculture and allied activities has picked up pace and surpassed previous years’ growth numbers during the month of Jan 2021. Credit to Agriculture and allied activities posted a growth of 9.9% (9.5% YTD) vs 6.5% (3.8% YTD). Industrial credit growth continued to remain in negative terrain even as Medium industrial credit rose sharply by 19.1%. Industrial credit was dragged by negative credit growth in large industries.

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CVs market is gaining traction...finally

Wholesale volumes for February 2021 came on a strong note as we reached the end of the fiscal. During Feb’21, while PVs maintained momentum, 2W and tractors were steady as CVs started gaining traction. Looks like it is a long way down the road for 3W. During the fiscal 2021, auto industry has put up a strong show during the post lockdown recovery and the dent is not going to be as severe as expected initially. This was made possible by demand for personal mobility, launch of new models, pent up demand and attractive interest rates and innovative financing schemes by banks and NBFCs. While there were some minor aberrations in the form of supply chain obstacles, shortage of components like chips, for Indian players the ride has been smooth so far. Amid expectations that these shortages would intensify in the coming months, industry experts are not ruling out full-fledged recovery in the next fiscal driven by a slew of factors.

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Government’s PL I Scheme to boost domestic manufacturing

Production Linked Incentive Scheme (PLI) is meant for enhancing India’s manufacturing capabilities and enhancing exports by supporting domestic exporters through various incentives. Thus, helping them to beef up their position. The scheme aims to give companies incentives on incremental sales of FY21from products manufactured in domestic units. While the scheme also invites foreign companies to set up local manufacturing units, it also encourages Indian companies to set up or expand domestic manufacturing units and to generate more employment with an aim to reduce reliance on imports.

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PLI scheme and vehicle scrappage policy to support auto volumes

Wholesale volumes for January 2021 started on a strong note for PVs and tractor as they continued to maintain momentum. Auto makers welcomed New Year amid uncertainties created by supply chain constraints and price hikes.Domestic PV industry reported a mid-single digit volume growth driven by inventory build up. Looks like two wheelers (2W) took a break after long time as volumes might have decelerated. However, 2W exports continued to race ahead and showed improved due to mix of low base and recovery in target markets. Tractors continue to rule the roost with strong 50% growth driven by strong demand from an upbeat rural economy. Within CV, M&HCV and 3W continue to show gradual recovery.

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Credit growth – Remains steady at 6%

Finally the budget the day has come and everyone is on their toes since this is the first union budget since the pandemic. The nervousness in markets is clearly visible. In the run up to the event, India’s broader markets have corrected over 4% from their life highs due to a combination of global factors and also due to profit booking ahead of key event. After hitting the life highs of 50000 and 14700 for the first time on Jan 21, both Sensex and Nifty, have breached all major supports. Why not? Expectations are running high and the government has on its part is keeping the expectations high by making promises like ‘once in a century’ budget and so on. It is a tight rope walk for the Finance Minister and her team to achieve sustainable recovery, achieve growth and come up with an all-inclusive budget without neglecting any segment.

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The first budget of the decade and the first budget after the pandemic does have some big bang reforms or announcements. The Finance Minister has focused on continuing on the recovery path and has done what needs to be done to make sure domestic manufacturers benefit wherever possible. Some big bang reforms like divestment of two public sector banks and LIC’s IPO is a step in the right direction. The government’s intent of not to spoil the recovery party is clearly visible as it did not impose covid cess or increased tax rates on the wealthy or securities transactions or capital gains and so on as many worried. In fact in the current scenario no big negative is a big positive for the markets and the markets have given a big thumbs up for the budget. At the close of the trading session on the budget day, Indian markets have gained nearly 5% led by banking stocks thanks to big bang reforms announced for the sector.

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Budget FY22 – A tight rope walk

Finally the budget the day has come and everyone is on their toes since this is the first union budget since the pandemic. The nervousness in markets is clearly visible. In the run up to the event, India’s broader markets have corrected over 4% from their life highs due to a combination of global factors and also due to profit booking ahead of key event. After hitting the life highs of 50000 and 14700 for the first time on Jan 21, both Sensex and Nifty, have breached all major supports. Why not? Expectations are running high and the government has on its part is keeping the expectations high by making promises like ‘once in a century’ budget and so on. It is a tight rope walk for the Finance Minister and her team to achieve sustainable recovery, achieve growth and come up with an all-inclusive budget without neglecting any segment.

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Will 2021 be the year of equities?

Every investor wants to invest in the best investment options in such a way that he can achieve maximum return with minimal risk in a given tenure. The investment options that you choose should depend on your risk appetite, investment horizon, financial goals, investment objective and liquidity needs. Historically, retail investors in India were exposed to very limited options including gold, real estate, equities, mutual funds and fixed income products like bank FDs. Public Provident Fund (PPF), and Bank RDs.. With passage of time, thanks to financial engineering, investors today have a wide range of investment options including exchange traded funds (ETFs), real estate-investment trusts (REITs), and sovereign gold bonds. Given low financial literacy levels, a large section of public switch in between fixed income products and equities depending on the euphoria in the markets.

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Auto Volumes – Growth momentum in PVs and 2Ws to sustain

Wholesale volumes for December 2020 came in on expected lines with no positive surprises or negative shocks despite lower discounts. This was due to lower base in the corresponding period last year and as OEMs fill inventory post festive season. PV segment continued to post double digit growth led by sustained demand for compact cars and utility vehicles. Two-wheelers (2W) volume growth continued to be robust with Royal Enfield and TVS Motors leading the pack with YoY growth of 37% and 20% respectively. Tractor volumes continue to register strong growth in December as well supported by favourable macro factors. CVs are showing some momentum due to pick up infra and mining sectors. However, LHCV and MCVs continue to lead the growth. OEMs anticipated a strong demand during the month due to discounts offered to clear year-end inventory and in anticipation of higher prices starting from Jan 2021.

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Credit offtake settles at low levels

Credit offtake in the economy stabilises at low levels of around 6% YoY in the month of November 2020. YTD gross bank credit growth moved into positive territory. YTD bank credit grew at 0.3% vs. -0.5% during previous month. An active credit market due to record low bond yields is contributing to this lacklustre growth. Non-food credit growth for November month came in at 6% in November 2020 vs 5.6% Oct 2020 and 7.2% during November 2019.

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Markets at historic highs – what should investors do?

Year 2020 will go as a standout year in living memory for investors. It has been a remarkable journey for the markets to the bottom – induced by covid and to historical highs. Markets corrected nearly 40% from previous peaks seen in January this year. Nifty has risen like a phoenix from the nadir of the correction and rallied 79%. Markets have turned euphoric and are hitting fresh record highs every day. So, what is driving the rally? Central banks globally are repeatedly pledging to keep the liquidity taps open until they gain confidence that economy can stand on its own and the pandemic has completely subsided. This coupled with near-zero interest rates for a long period has made the global markets awash with liquidity, which is causing the rally.

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2021 – The year of small and midcaps?

With 2020 coming to an end and as we are awaiting 2021, every investor and market participant is excited as to what 2021 would like and what’s in store for us in year 2021, especially after having a tumultuous 2020. Having conquered all the stymies we came across in 2020, we are hoping for a new year, new beginning. Nevertheless, there is caution in markets amid rising death tolls, traces of new variants of virus which is more deadly, which is causing some countries in the European region impose partial lockdowns.

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2020 – Journey to the bottom... and top

disruption it brought to the normal life in the form of lockdowns and social distancing. For stock market investors, it was a year of many surprises – both negative and positive. It has been a roller coaster ride for the markets and investors alike. For investors, the ride has been more of a financial, psychological and emotional one. It has been a remarkable journey for the markets to the bottom – induced by covid and the phoenix-like rise from the nadir of the correction. Over 79% rally in the headline Nifty from March lows was unprecedented, thanks to the co-ordinated stimulus from the developed world. Buoyed by positive news on vaccine front and sustained recovery in lead economic indicators, markets are scaling new highs each day.

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Credit offtake continues to decelerate

Credit offtake in the economy continues to remain subdued despite availability of ample liquidity with banks. YTD gross bank credit growth continues to remain in negative territory as Q1 was affected due to lockdown and the next two quarters were lost in transition. YTD bank credit grew at -0.5% vs. 0.7% during previous fiscal. Active credit markets due to record low bond yields also contributed to this de-growth. This is further evident in declining share of industry credit in total outstanding credit, which has further come down to 30% from 32% in October 2019. Credit growth for October month slowed down to 5.5% vs 8.4% during Oct 2019. Credit growth continued to hover around 5.5% to 6.0% levels for the third consecutive month in this fiscal. Despite transition of RBI rate cuts by banks, credit growth is yet to pick up. Banks continue to remain selective in extending loans as they continue to conserve capital to absorb unexpected additional stress due to covid and uncertainties created by regulatory dispensation and Supreme Court injunction. We continue to believe that going forward credit growth continues to remain subdued around these levels as banks continue to remain risk averse till clarity emerges on asset quality picture. We expect banks would continue to adopt selective approach by focusing on AAA rated corporate clients and top quality retail customer base even if it means sacrificing yields as declining cost of funds across the board would help them to offset it.

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RBI Leaves Rates Unchanged

RBI at its policy meet held between December 2nd and 4th decided to leave key policy rates including repo and reverse repo unchanged at 4% and 3.35%. The RBI also decided to continue with accommodative stance as long as it is necessary – at least during current fiscal year and into next fiscal to ensure that growth revives on a durable basis and the adverse impact of Covid-19 is completely mitigated on the economy. By doing so, RBI is trying to achieve twin objectives of reviving growth and achieving the medium-term target of CPI of 4% within a band of +/- 2%. CPI at 7.8% has been consistently above RBI’s comfort zone due to elevated food prices. Core CPI (ex food and fuel prices) has also spiked to 5.8% in October from 5.4% in September 2020.

Karvy KSTREET - 117

Q2FY21 Earnings Review: Post Lockdown Blues

With Q2FY21 results season coming to an end, its time to take a look at what happened during the season and who are winners and losers. Broadly speaking, sequentially the earnings has seen a significant jump in revenue and profitability as businesses recovered post lifting of lockdown and pent up demand kicked in in some sectors like consumer durables, auto and housing. In addition to pent up demand, record low interest rates and attractive financing schemes announced by banks and NBFCs ahead of festive seasons also propped up growth of these sectors.

Karvy KSTREET - 116

Covid vaccine efficacy - what does this mean

Of late, one pharma company after another have been announcing trial results of their vaccine candidates with efficacy rates ranging between 90-95%. With Moderma, followed by Pfizer and Oxford announcing the outcomes, markets cheered and welcomed the news with a sigh of relief. This has raised hopes of returning to normal gradually and steadily amid continued uncertainty and rapidly raising virus cases indicating beginning of a second wave of the crisis. For governments all over the world its like controlling wild fire wherein they are simultaneously making preparations for vaccine distribution even as they fight preventing spread of virus by imposing fresh round of lockdowns and social distancing norms.

Karvy KSTREET - 115

Credit offtake stays subdued

Credit offtake in the economy continues to remain subdued despite availability of ample liquidity with banks. Gross bank credit growth stabilises at low levels of around 6% for third consecutive month. Credit growth for September month was at 5.8% vs. 8.2% registered in Sep 2019. Food credit growth at 10.5% continues to outpace non-food credit growth. However, growth is lower when compared to September 2019 when food credit registered a growth of 26%. Overall bank credit growth for September 2020 was dragged by flattish industrial growth even as credit to services sector and personal loans accelerated by 9% each. Credit to agriculture and allied activities increased by 5.9 per cent in September 2020 as compared with a growth of 7.0 per cent in September 2019.

Karvy KSTREET - 114

Festive demand pushes auto volumes growth

Auto companies continue to push ahead with robust growth in wholesale sales volumes in passenger vehicles (PVs) and two-wheelers (2W) in the month of October 2020 due to festive demand. Factors like continued demand for personal mobility, festive season offers, low interest rates and easy availability of financing contributed to continued buoyancy in PVs and 2W. Other factors like higher off take from semi-urban and tier 2 and tier 3 markers, excitement created by new launches and continued availability of labour, stable supply chains and strong dispatches to dealers too aided volume growth.

Karvy KSTREET - 113

RIL and Amazon fight it out for Future Retail

Two of the world’s richest men are fighting it out to buy out brick and mortar retail network of Future Group which is on the death bed. What’s at stake is strategic access to a network of popular chain of retail outlets across formats, which is expected to compliment their online presence and enhance presence across major cities. The situation is such that each one of them either wants to own it or prevent other from owning it. According to Forrester Research, Flipkart and Amazon rule India’s e-commerce space with a share of 31.9% and 31.2% respectively, while Mukesh Ambani is stooping to conquer the space through JioMart and a basket of related tuck in acquisitions he made in the recent past. It’s not strange that Ambani is vying to grab Future Retail as it would easily place him in the top league.

Karvy KSTREET - 112

Indian Economy – In recovery mode

India looks to be slowly taking on Covid crisis with positive news springing up on various fronts - of course save for rapid deterioration in numbers due to risk of second wave ahead of festive season in India. Optically the average daily new cases have fallen to ~55,000. This is more to do with the number of daily tests – which is stable around 1.1 Mn tests per day. Active cases declined for the fifth consecutive week, thanks to faster recovery rate. However, India’s case curve is still steep and shows no signs of flattening. Leadership of states in incremental active cases has slightly changed with Kerala and West Bengal recording highest growth rate. With major festivities lined up in West Bengal and Bihar Elections, there is a possibility of slight deterioration in covid-stats in the coming months. The positivity around covid statistics is coupled with more positive news in terms of high frequency economic indicators, which points to a sustainable recovery at the ground level. Petrol consumption growth was positive YoY for the first time since pandemic breakout. Diesel consumption in Sep 2020 is slightly low when compared to Sep 2019. Electricity consumption has turned positive for Oct MTD when compared to Oct MTD in 2019, where the consumption was relatively lower. However, electricity consumption when compared to Oct 2018 is same implying pick up in electricity consumption.

Karvy KSTREET - 111

RBI Pauses leaving doors open

As expected, RBI maintained the status quo for the repo rate at 4% and reverse repo rate at 3.35% and has maintained the stance as “accommodative”. The RBI governor insisted that the economy is improving amid the COVID threat. By the end of this financial year, the RBI is expecting that the high-frequency indicators could note a significant improvement due to the progressive unlocking by the government. The business environment may turn positive and optimistic as the PMI pointer recently showed the highest expanding value of 56.9, even though there would be a contraction of 9.5% in GDP as noted by the RBI Governor. The Governor also said that inflation could ease by Q3 and Q4 toward the expected target as the supply chains could restore.

Karvy KSTREET - 110

September Auto Volumes - Festive cheer creeps in

Auto companies continue to push ahead with robust growth in sales volumes in passenger vehicles (PVs) and two-wheelers (2W) ahead of festive season. The growth in PV and 2W segment is driven by preference for personal mobility and dealers stocking up inventories ahead of festive season in the coming two months. Gradual opening up of tier II and tier III regions and resilient rural economy buoyed by favourable monsoon and higher agri output have led to sustained growth in tractors segment. On the supply side, improvement in utilization levels, availability of labour and normalization of supply chains (relative to April-May 2020) have led to improvement in OEMs’ supplies to dealers. Retail sales for the first time in September posted a growth year-on-year.

Karvy KSTREET - 109

Lakshmi Vilas Bank – at the centre of crisis

Concerns over reliability and credibility of the banking sector have come to the fore yet again. Not because of piling up NPAs or interest waiver case. In the recent past, two banks - Dhanlaxmi Bank and Lakshmi Vilas Bank (LVB) are vying with each other to grab headlines. Within a week's gap shareholders of Dhanlaxmi Bank and LVB have voted against the appointment of new CMD, whose names were approved by the RBI. While in case of Dhanlaxmi Bank, it was due to alleged concerns of majority shareholders on the bank losing its ‘Kerala-identity’ due to bank's new CMD Sunil Gurbaxani (allegedly) favouring investors from north-India lobby, there’s much more to it in case of LVB.

Karvy KSTREET - 108

Agri reforms – Good on intent but more needs to be done

Last week India’s law makers passed three contentious bills related to agri sector that are expected to change the way Indian farmers do business. These bills are long-pending reforms and are steps in the right direction to reform the India’s ailing farm sector which is neglected in terms of coming up with long-lasting reforms which would have a realistic impact. For successive governments, so far agri reforms meant doling out farm loan waivers ahead of polls to appease farmers by providing these short-term unproductive solutions. While three bills that were passed are expected to address some of the burring problems partly, it has triggered a wave of concerns among the farmers and other interested parties.

Karvy KSTREET - 107

Multicap Schemes – Volatile Times

SEBI issued a circular on September 11 tweaking investment rules of multicap schemes. These new norms clearly prescribed minimum investment limits which were not there hitherto. The new rules mandate minimum investment of 75% in equities as opposed to 65% currently. SEBI in the circular has also altered the portfolio allocation norms with intent to bring in more diversification across large cap, mid cap and small caps. These norms require fund managers of multi cap schemes to allocate minimum of 25% each across large caps, mid caps and small caps. There were no such defining norms in the past. According to industry estimates, current AUM of multi-cap funds is Rs. 1.3 Tn and the approximate split between large cap, mid cap and small cap is at 78%, 16% and 5% respectively, nearly mimicking the current proportion of market capitalization across categories in NSE 500 stocks. These new allocation rules are to be complied by fund managers before Jan 31 2021, within one month of AMFI releasing next list of large cap, mid cap and small cap stocks.

Karvy KSTREET - 106

August Auto Volumes –Recovery continues

As the auto industry gets accustomed to the new normal, it continues to post month-on-month improvement in volumes. The rebound between May 2020 and August 2020 was faster than expected. This was driven by early onset of festive season, inventory refilling at dealer ships, OEMs’ efforts to maintain momentum by tying up with banks and NBFCs to launch innovative financing schemes for dealers and consumers alike. Rural demand continued to maintain pace as was visible in strong sales in rural focused segments like motor cycles and tractors and tillers.

Karvy KSTREET - 105

Indian Economy – In recovery Zone?

India’s Q1FY21 real GDP contracted -23.9% worst than the worst expectations. It was the worst ever growth number for the country which once won the laurels for being among world’s fastest growing economies. While the number was a bit shocking, it was understandable as the economy came to near standstill for most of the Q1FY21. Moreover, market shrugged off this number and was rightly glued to lead indicators for hints and signs of recovery. Globally, equity markets were buoyed by hopes of vaccine and liquidity infusion by central banks. During August some markets were closing at record levels. Indian markets too recovered very sharply from their covid lows as Nifty’s valuations at a one year forward PE of 22x looks very stretched and expensive. While the aspects related to how expensive Nifty’s valuations are and if the markets are in over bought zone are debatable, it is worthwhile to focus on the reasons for this optimism in the markets and the economic indicators that have led to this optimism.

Karvy KSTREET - 104

Indian Inc may need more time than anticipated for debt repayment

During the Financial years 2015-19, Indian Inc had a better record of debt servicing ability. However during the recent quarters, as the economic growth takes a downturn, the debt servicing ability also took a dive. A report shows that the downgraded debt surged by more than four times compared to upgraded debt from FY19 to FY20. The ratio of companies resulting in downgrades to upgrades is also sharply down to 0.25 from 1.65 for the same period, a first of its kind since FY14. Even though this is good news, it is not that worth as the highly leveraged Indian firms are facing a fresh set of new challenges in debt servicing. These challenges can be termed as restricted credit access, reduced government spending, the slowdown in consumption demand and economy. However, there is also a greater chance that the rating agencies are acting together to face off the earlier criticism of their late actions of corporate debt distress.

Karvy KSTREET - 103

AGR Dues Case – Of Twists and Turns

Despite 15-year long wait clarity is yet to emerge on when and how the AGR dues will be settled and when the government would receive the dues. Even 10 months after the final hearing, the curious case of AGR dues has seen many twists and turns which has kept the telecom companies on tenterhooks. Moreover, many new angles were added to the case like the settlement of dues by insolvent companies and so on.

Karvy KSTREET - 102

Focusing on the API production may boost the Pharma industry in India

one of the largest producers of APIs and is exporting them to India and other countries at a large scale. The recent rise of the Covid-19 or Coronavirus epidemic in China has created uncertainties whether the virus spread impacts the APIs supply. With the already subdued Pharma industry, rising medical costs can be a possibility and even the current inventories may only last about a quarter. The fear of supply disruption is not due to the contagiousness of the virus as it gets killed within five days in the open when sent through consignments.

Karvy KSTREET - 101

RBI takes a break - Rates unchanged, moratorium not extended

RBI’s monetary policy committee on expected lines left all key policy rates unchanged while retaining the accommodative stance. However, RBI has left the window open for another policy rate cut which hinges on the inflation trajectory. One big policy outcome is overhang on the banking sector and the markets is gone as the RBI did not mention extension of moratorium. This, coupled with announcement of one-time debt racast plan with riders is a major positive for the markets and the banking sector. The moratorium has masked the real picture on asset quality at banks. This should result in enhanced and uniformed disclosures on asset quality and covid’s actual impact on the balance sheets. RBI has taken enough care to ensure that it is applicable to only Covid-related stressed assets and it safeguards financial stability.

Karvy KSTREET - 100

India’s Core output – on a downward spiral

India’s output for the eight core infrastructure industries sectors shrank -15% in June 2020 - fourth consecutive month of contraction. June month’s fall was driven by fall in output of crude oil, coal, power, natural gas and cement. These core sectors expanded by -1.2% during June 2019. Revised data shows that the index contracted -22% in May 2020, as opposed to initial estimate of 23.4%. For the quarter ending June 30, 2020 the index contracted by 24.6% YoY. This comes as a no surprise as economic activity nearly came to a standstill due to lockdown induced by pandemic. The halt of economic activity of all major core sectors was halted by a varied set of factors including shortage of construction labour, as they moved back to their native places and in some cases due to liquidity crunch and lack of permissions as they operated in containment zones.

Karvy KSTREET - 99

Banking Sector – Entering rough waters

As we entered FY20 on a sliding path all economic indicators started deteriorating gradually, be it consumption or growth or tax collections. The journey of 2020 was blotted with debt defaults by some of the marquee names of the Indian corporate sector. The worst part is this time the presence of some of the top notch names in the banking and NBFC sector, which are life line of the credit flow in the economy hit it hard where it hurts the most. It is in the context that we gave a royal welcome to coronavirus in to our nation that it nearly ravaged the economy but for some measures announced by the central government and RBI that we are barely able to survive.

Karvy KSTREET - 98

Jio-Google Partnership – It’s a Big Deal

RIL’s Mukesh Ambani at the company’s AGM announced that Google will invest $4.7 Bn for a 7.7% stake in RIL’s Jio. Google joins a bandwagon of global investors from Silver Lake to KKR to Facebook who have doled out investments worth $20 Bn in recent months. This deal is indeed a big one for both companies as Reliance sees tapping India’s growing market for data and online services is crucial to take the company into the next level of growth and tapping low cost mobile users is important for Google.

Karvy KSTREET - 97

Is the current market rally sustainable?

Indian markets have put up a very impressive rally in the past three and half months. After hitting a low of 7511 just before the announcement of lockdown, markets have gained nearly 45% to hit a high of 10847 this week. Initially the rally was not broad based and the churn was seen in few select large caps. The markets were largely driven by the relief measures being announced by governments and central banks world over and on hopes of a medical breakthrough for the pandemic. But as the rally matured, investor interest was seen in select high quality small and mid caps with retail participation visible in some counters. Markets gained confidence as world over governments started lifting lockdowns amid rising covid cases and worries of second wave of outbreak.

Karvy KSTREET - 96

Clash of titans – Amazon Vs. Reliance Retail

Now that the Future group is cash strapped and is in need of funds to clear the debts or defaults, it’s up for grabs. It is evident from the past that Amazon has tried to raise the stake in More retail of Aditya Birla jointly with other players, apart from raising the stake in Future retail segments, This implies that Amazon has a long term goal to stabilize its foot in the Indian retail segment.

Karvy KSTREET - 95

Debt funds – Worth the risk?

First it was Templeton and then Aditya Birla Sunlife, debt funds have been in bad news of late. The two worst affected categories within debt funds include credit risk and medium duration funds. These two categories have seen biggest redemptions due to apprehensions of liquidity concerns and defaults. Since IL&FS crisis and as one corporate house after another started defaulting on their interest payments, the debt scheme MF holders have been through an emotional roller-coaster ride since the investor perception about debt funds is misplaced as most of them perceive debt schemes to be of low risk.

Karvy KSTREET - 94

Auto industry - sailing in rough waters

The auto sector has been witnessing one of the worst cyclical downturns over the past few quarters due to multiple factors, including lower demand, transition to BS VI and NBFC liquidity crisis. This led to inventory pile up as volumes were hitting record lows month after month. According to SIAM, sales of cars declined 17.87% during FY20.

Karvy KSTREET - 93

Covid Impact on Insurance industry - Near term risky, long term positive

India is still reeling under the impact of Coronavirus and lockdown. It has a wide ranging impact across the sectors of the economy. In some cases, the impact is minimal and short lived. However, in case of some sectors like the insurance industry, the impact is going to be negative in the near term as it will be hit from multiple directions

Karvy KSTREET - 92

China’s ‘wolf-warrior’ policy and its repercussions

It is evident that crises cause protectionism. It is during the economic crises that the principles of free trade are put to test and protectionism takes the front seat. As the pandemic is growing stronger by day, the political blame game has started. Across the globe, backlash against china is building about the way China initially handled the information related to the crisis

Karvy KSTREET - 91

Lockdown effect on Agriculture

The new pandemic COVID-19 will have a huge impact on the global economy. Lockdowns across the world have disrupted the production and supply chains of the countries affecting the economic activities. Indian economy is also expected to slow down during fiscal FY21. Global rating agencies like Fitch and Moody’s have slashed India’s growth rate to 0.2 – 0.8% for FY21 vs. A growth rate of 2.5 – 6% before the pandemic breakout. The lockdown is expected to be a major dampener to the demand impacting across the entire spectrum of industries such as automobiles, Capital Goods, construction, cement, IT, Gems & Jewellery, Airlines, hospitality, SME, real estate, etc.

Karvy KSTREET - 90

Post lifting of lockdown environment – uncertain times ahead

After dilly-dallying for a while governments across the world are bracing for lifting of lockdown. The lockdown has shattered economies and individuals alike Governments, unable the bear the brunt of the lockdown have decided to lift the lockdown amid the complexities that they would have to face after a prolonged lockdown, be it in terms of economic slump or other practical situations like ensuring social distancing.

Karvy KSTREET - 89

New found interest in Jio - Why the rush?

RIL’s media arm Jio Platforms (Jio) has seen three investments in a span of just 2 weeks. The rush to get a pie in the media company started when on April 22, Facebook (FB) announced a deal with RIL to invest $5.7 Bn to buy a stake of 9.99% in Jio.

Karvy KSTREET - 88

Earnings outlook - Get set for a bumpy ride

The global economy is reeling under the pressure of the pandemic and the lockdown. As the economies across the globe have initiated the process of relaxation with varying degrees, markets are volatile as the sentiment swings between hope and despair in the fight against the virus.

Karvy KSTREET - 87

Markets are curiously waiting for the COVID cure

On April 29, the Dow Jones surged 600 points or 2.6% after Dr. Anthony Fauci, US’ top infectious disease expert sounded optimistic about Gilead Sciences’ experimental drug remdesivir.

Karvy KSTREET - 86

WTI Crude Futures in Negative Territory - A Historic Event

In addition to economic and medical plight the global coronavirus pandemic is causing, it claimed another unexpected victim on Monday– global crude prices. Amid deep uncer¬tainty over the economic impact the virus breakout is going to have, the global crude prices have corrected very sharply since the beginning of the March

Karvy KSTREET - 85

Deepening economic impact of Coronavirus

Coronavirus is unwilling to subside. Number of confirmed cases exceeds 2 million globally with more than 1.4 lakh deaths. Governments world over are struggling to contain the spread.

Karvy KSTREET - 84

FY21 Market Outlook – A roller-coaster ride?

COVID 19 and the ensuing lockdown will hit the economy significantly in FY21. Depending on the duration of the lockdown and the time it takes to get back to normalcy, we expect even FY22 to see some impact.

Karvy KSTREET - 83

Stocks for Struggling Times

Due to the widely known reasons, the markets witnessed a steep fall from its all-time highs washing away a bulk of investor’s wealth. However, it might be the right time to accumulate quality stocks to create wealth as history proved it right to do so a lot of times.

Karvy KSTREET - 82

Covid 19 – India responds

India has responded a bit early by announcing lockdown. In its move, it is pretty much clear that it intends to prevent rapid spread of the disease rather than exerting pressure on a weak healthcare infrastructure.

Karvy KSTREET - 81

Covid-19 – Impact on Indian Economy

As Corona virus is spreading fast across globe, a tremendous impact is likely to be seen on global economy. It is already visible in credit spreads, as the spreads have risen remarkably high with US Fed rate. The recent monetary action announces by the Fed is expected to revive the economy and reduce the spreads. The US and other government world over have assured the markets that unlimited liquidity support will be made available to the global financial system. Japan may face lowering of external demand and personal consumption due to virus and might enter into a technical recession with expected growth of 0.1% to 0.4% this year.

Karvy KSTREET - 80

CoViD-19-Effect on the world economy

The CoViD-19 which originated in the city of Wuhan, China has killed around 5000 people and infected over 1.30 lakh people across 100 countries.

Karvy KSTREET - 79

Yes Bank Crisis – Say No to Yes

Finally the day has come. After much dilly-dally and constant consultations and reviews, RBI has placed Yes Bank under moratorium.

Karvy KSTREET - 78

There might be more tough times ahead

The third-quarter results of Indian Inc are disappointing. Owing to this fact the government may have a lot a do in order to boost the demand.

Karvy KSTREET - 77

Coping with Covid-19

Covid-19 aka coronavirus could be one of those deadly epidemics, which could break the back of the global economy which is already reeling under the pressure of ongoing Sino-US trade war.

Karvy KSTREET - 76

Focussing on the API production boost may lift the ailing Pharma industry in India

is one of the largest producers of APIs and is exporting them to India and other countries at a large scale.

Karvy KSTREET - 75

Union Budget 20-21 – A mix of salt and pepper

Amid a challenging environment and with adversities all around, the government has presented its annual budget for the fiscal FY20-21.

Karvy KSTREET - 74

Union Budget 2020-21 – It’s time to act

Indian economy has indeed performed lower than expectations; growth in the last quarter was not only disappointing in absolute growth rate, but also relative to expectations.

Karvy KSTREET - 73

Maybe it’s time for the auditors to explain if they resign before their term

Recently, we found that SEBI snooped into the ways and the accounting affairs of statutory auditors of certain listed companies after many accounting regularities had shown up.

Karvy KSTREET - 72

US-China Trade deal – The war is still on

The US and China on Jan 15 announced phase I of a trade deal which Trump boasts of delivering a future of economic justice and security for American workers, farmers and families.

Karvy KSTREET - 71

To become a 5 Trillion dollar economy, we may need to first focus on MSME effective funding

Even though the name makes it look small, the MSMEs contribute to the tune 29 percent to the Indian economy and may be seen as a potential problem solver of the current Indian Job crisis.

Karvy KSTREET - 70

The year gone by – few hits and many misses

While 2019 saw many historic events like record highs for Nifty and re-election of Modi with a strong economic mandate, there have been many misses on the macro front. 2019’s corporate calendar was blotted with many high profile corporate defaults, NBFC crisis, consumption slowdown and lowest GDP growth in the past five years.

Karvy KSTREET - 69

Indian Inc debt servicing ability may take a dive for some more time

During the Financial years 2015-19, Indian Inc had a better record of debt servicing ability. However during the recent quarters, as the economic growth takes a downturn, the debt servicing ability took a dive.....

Karvy KSTREET - 68

Corporate India may require a systematic informant system

Whenever a whistle blowing event occurs in Corporate India, the stock prices of the listed firm seems to react violent making the investors losing a large chunk of their investment value. However, the panic reaction seems massive.....

Karvy KSTREET - 67

Debt servicing ability of the companies may need a better process to evaluate

Apart from the slowdown in the economy, we have seen a series of incidents of companies with corporate governance issues. During slowdowns, it’s usual that the demand wanes which may result in difficulty to the companies to repay their debt with ease.....

Karvy KSTREET - 66

The auto sector may need to alter to new business dynamics to sustain the current slowdown

The recent slump in the auto sector sales to the lowest had made the government take certain measures to boost the demand for auto sales. The centre has announced a few measures, such as deferring the revised registration charges, replacement of the previous fleet of vehicles by.......

Karvy KSTREET - 65

The Centre may need to focus on the primary sectors to set right the economy

With the growth rate declined steeply in the one and a half year, the government has announced a few stimulus packages to boost the economy. However, initially, it needs to address the main factors that are holding back the growth which is personal consumption and investments. ......

Karvy KSTREET - 64

Indian economic reforms need a faster pace of execution

Asian economies like South Korea, Singapore, Taiwan and Hong Kong have transitioned to high-income economies based on an economic model emphasizing exports. However, India is still searching for the path to becoming a trade surplus nation......

Karvy KSTREET - 63

The key reason behind why Public Sector Banks lost to Private Banks at a faster pace

Public sector banks witnessed bouts of capital infusion over the last 5 years by the Centre. However, the PSBs are lagging behind the private banks in many key parameters even after multiple capital infusion bouts by the government.....

Karvy KSTREET - 62

INSURING NEW INDIA

Life insurers pushed protection business, given the untapped opportunity and high margins. Insurers reported a 60-70% rise in protection premiums with share rising to 7-17% of new business premiums (including credit protect) which leads to 1) a rise in capital intensity.....

Karvy KSTREET - 61

The Centre needs to act to save the Telecom industry from its upcoming bankruptcy

Recently, the telecom sector was in the news as the SC ruled against the telecom companies’ dispute against the definition of AGR. However, this verdict is likely to push the telecom sector into a financial abyss.....

Karvy KSTREET - 60

Indian Inc may need an organized whistleblower system

On a major news front, Infosys investors lost a market cap of around Rs. 50,000 crore in value after an anonymous whistle-blower employee’s group complaint against the unethical accounting practices and management conduct.....

Karvy KSTREET - 59

IIP for August Disappoints While Retail Inflation for September at Elevated Level

Index of Industrial Production (IIP) for the month of August 2019 fell to (-) 1.1% in comparison to same period previous year on YoY basis and against street expectation of 1.8% growth.....

Karvy KSTREET - 58

India’s corporate debt woes may continue to rise at least for a few quarters

The Indian corporate debt servicing ability currently seems to take a downturn. However, during the financial years 2015-19, the corporate debt servicing ability seemed to be better.....

Karvy KSTREET - 57

RBI cuts Policy Rate while maintaining Accommodative Stance

As we had expected, the Monetary Policy Committee in its fourth bi-monthly meet has cut its benchmark repo rate by 25 bps to 5.15 percent. Reverse repo rate stands at 4.90 percent.....

Karvy KSTREET - 56

MSME segment needs reforms to increase the number of listings

IPO market after being active in the last few years seems to be losing its shine in India. If we look into the data for the recent years, companies raised funds close to Rs. 99000 crore in FY18 while it was just Rs. 36400 crore in FY19. FY20 seems to have a further sharp fall with only a collection of Rs. 13708 crore so far....

Karvy KSTREET - 55

A relook might be necessary for the Credit rating process

Recently, we have witnessed a streak of rising corporate governance issues in the companies besides the slowdown in the economy. During slowdowns, businesses struggle with slowing demand which may result in difficulty to service the debt to their creditors......

Karvy KSTREET - 54

Benign CPI for August and higher IIP is encouraging but early to call for a turnaround

The National Statistics Office has released CPI for the month of August 2019 which remains more or less flat at 3.21% compared to 3.15% in July. The number has marginally missed consensus forecast of 3.3%. There is a divergence in rural and urban inflation.....

Karvy KSTREET - 53

Automobile companies may need to rejig to more sustainable business models

Automobile sales declined to their lowest for months in August and the industry is again looking for aid from the government.....

Karvy KSTREET - 52

With the growth rate declining at a faster pace, the Centre may need to focus on conventional economies

With India’s growth rate falling steeply over the last 5 quarters from 8.1% in Q4 of 2017-18 to 5% in Q1 of 2019-20, the Centre has woken up to the gravity of the case. ....

Karvy KSTREET - 51

PSBs may need profitability KPIs than accounting them for social outcome KPIs

Over a period of last 5 years, the government has infused Rs. 3 lakh crore to recapitalize the Public Sector Banks (PSBs). However, the prime point discussion of our writing is about the government making the Public Sector Banks accountable for their Key Performance Indicators (KPIs)....

Karvy KSTREET - 50

Reliance Jio’s new broadband services may bring disruptive changes in the digital usage

Jio’s bold plans to start the optical fibre-based broadband services could be a game-changer for the industry and customers alike. Reliance’s promise to offer speeds of 100 Mbps for Rs. 700 per month may turn disruptive in Indian markets where users do not get more than 20-30 Mbps on average. However, the tariff plans are yet to be revealed by the company....

Karvy KSTREET - 49

RBI Cuts Rate by an Unconventional 35 bps…

The RBI has cut the policy rate by 35 bps, an unconventional number, while retaining their accommodative stance. The repo rate currently stands at 5.40% and the reverse repo rate is adjusted to 5.15%....

Karvy KSTREET - 48

Central Bank Easing

Global markets were expecting a more dovish Fed and are disappointed by “mid cycle adjustment” and in the immediate aftermath of the move, the US Dollar (DXY) rose to a 2 year high. The move is not good for EM equities including India and on Thursday, Nifty declined by 1.24%....

Karvy KSTREET - 47

Unlike before, auditors may need to disclose the reasons for their intermittent resignations

A positive outcome of the recent accounting irregularities in the listed companies is that the regulatory bodies have begun to snoop the statutory auditors’ ways and their affairs of accounting. SEBI has proposed new rules last year, to prosecute auditors and levy penalties if found negligent...

Karvy KSTREET - 46

Unreasonable taxes are not economy friendly

Despite a number of objections, it went unsettled that the Budget tried to increase the tax collection from surcharge and cess. Contradictorily, this move came in the wake of government releasing out the direct taxes code anytime soon.......

Karvy KSTREET - 45

Fiscal external borrowings – India will have to move ahead with caution

The Central Budget 2019’s proposal to raise part of the government’s borrowings in external markets and in external currencies has pleased the bond market and found favour with several economists. Given that the Centre’s total market borrowings for the current fiscal is at a high of Rs. 7.1 lakh crore......

Karvy KSTREET - 44

Union Budget 2019-20: Blueprint for a Strong Economy

Modi government committed itself to making India a US$ 5 Tn in next 5 years. Though initial reactions were mixed, governments’ continuous push for investment-led growth assures the vision of new India and a strong India......

Karvy KSTREET - 43

An eco shift to EVs is inevitable causing preliminary pain to auto makers

A preliminary proposal by the government to phase out fossil-fuel-based three-wheelers by 2023 and two-wheelers (up to 150 cc) by 2025 has created controversy among auto makers. It was believed that India will have a 100% electric vehicle (EV) fleet in public transport by 2030, and will aim for 40% electrification in personal transport by then.....

Karvy KSTREET - 42

New systemic reforms are required besides RBI’s amended debt management rules

The RBI’s Prudential Framework for Resolution of Stressed Assets, a diluted version of a February 2018circular struck down by the Supreme Court marks a break from the current debt resolution rules. The norms address the fears that stringent bankruptcy norms can disrupt credit growth and industrialactivity which may stand valid in some cases.....

Karvy KSTREET - 41

Inflationary Pressures Remain Benign

CPI for the month of May increased marginally to 3.05% from a revised 2.99% for the month of April. This indicates that inflationary pressures remain benign in the economy. This is in line with a decrease in inflationary expectations of households...

Karvy KSTREET - 40

Growth now the priority-RBI cuts Rate by 25 bps

With inflation under control, boosting economic growth has become the primary objective. As expected RBI reduced policy rate by 25 bps; the repo rate is now 5.75% and reverse repo rate is 5.50%. More importantly...

Karvy KSTREET - 39

Macro Indicators show that India’s consumption is shrinking

Consumers have evidenced to be drivers for the Indian economy in the last 3 years, supporting demand for goods and services with their spending whilst the investment leg of the economy has stalled. However, macro indicators within the last 5 months indicate that private consumption expenditure is losing steam.......

Karvy KSTREET - 38

The market shifts its focus to Fundamentals after the Election Mandate

Elections have dominated much of the market directions for quite a while now. With the Lok Sabha results and the elections out of the way, the euphoria created by it is slowly fading away as the focus shifts back on fundamentals.......

Karvy KSTREET - 37

CPI at 2.92% for April 2019

Despite a weakening economy, inflation increased to 2.92% YoY for April 2019 from 2.86% in March 2019 and exceeded the last 3-month number. However, inflation is within the RBI target and is unlikely to be a worry for the economy.......

Karvy KSTREET - 36

From The Desk Of Research Head

The Nifty is up 3.8% in CY 2019, backed by strong FII flows of about INR 710 Bn. However, equities have faced some headwinds over the last few days due to fears of escalation of US-China trade war. On the other hand, recent economic data is deteriorating.......

Karvy KSTREET - 35

With markets at all-time high valuations - investors need to focus on earnings than hype

Investors are in an exceedingly happy mood about Indian equities. Foreign Portfolio Investors (FPIs) have pumped-up $7 billion over March and April whereas domestic investors significantly upped their equity fund bets......

Karvy KSTREET - 34

Monsoon forecasts; Perception vs. History

A round of cheers has gone around in the markets, on the India Meteorological Department’sprediction of a close to normal South-West monsoon for 2019. In its initial forecast for this year, theIMD has said that it expects the general quantum of precipitation for June-September to be ninety-sixper cent of the Long Period Average (LPA)......

Karvy KSTREET - 33

From The Desk Of Research Head

The new FY19-20 has been going great guns for traders and investors as the markets are scaling newerhighs every now and then. The FIIs are pretty confident about the future of the Indian economy in thetime to come as a couple of big FIIs have already come out in the open ......

Karvy KSTREET - 32

Production cuts in automobile sector may point to an economic slowdown

The domestic automobile industry, which was booming early this fiscal year, is on the edge of crisis by the end of the year. The double-digit volume growth (year-on-year) in automobile sales during the initial months gradually phased into a single digit growth and converted into a volume drop phase continuously for the last three months. .....

Karvy KSTREET - 31

From The Desk Of Research Head

FY 19-20 has already seen investors getting rewarded by the markets as the markets have clocked fresh lifetime highs during the week gone by. The markets have already shrugged off its range-bound movement since January 2019; thereafter it shot up sharply after clocking a low in mid-February. .....

Karvy KSTREET - 30

From The Desk Of Research Head

As we bid adieu to the FY18-19, let’s get an overview of events which unfolded in due course. The year gone by, gave market participants the fun and thrill of a rollercoaster ride as the equity markets witnessed a lot of twists and turns due to several reasons.....

Karvy KSTREET - 29

US call to scrap zero duty on Indian exports is a component of a paradigm shift

The United States of America’s call to withdraw its Generalised System of Preferences (GSP) for Indian products is about to pinch Indian exporters of raw materials and intermediates specifically.....

Karvy KSTREET - 28

From The Desk Of Research Head

The rollercoaster ride about which we had mentioned in one of our earlier communication has already begun. The recent price action in the markets have been fabulous, the sentiment on the street is very cheerful thanks to the increased participation from the FIIs and FPIs who have already pumped in more than Rs. 30,000 crore since January this year....

Karvy KSTREET - 27

Tax tweaks in the Realty sector may complicate GST

Due to the continuous lobbying by realty developers, the GST Council has made multiple tweaks to GST for residential properties, reducing the effective GST rate for under-construction homes from 12% to a flat five percent which for affordable homes from eight to one percent....

Karvy KSTREET - 26

Economy: A Marginal Slowdown

Economic growth for Q3FY2018-19 slowed down to 6.6%, which is marginally below the consensus estimate of 6.7%. GVA (Gross Value Added) also slowed down to 6.3% as against consensus estimate of 6.5%.....

Karvy KSTREET - 25

Declining NPAs for banks - Too early to celebrate

Even though it’s good news that the NPAs are getting reduced from March 2018, it is yet to be confirmed that Indian banks are really out of their struggling phase. The RBI’s Financial Stability Report (FSR) states that in a major recovery from the Non-performing assets....

Karvy KSTREET - 24

From The Desk Of Research Head:

Macroeconomic data which came in during the last week is within the comfort zone of the RBI as the IIP spiked while the CPI cooled down by a decent margin. The IIP print for December 2018 came in at 2.4% vs 0.5% of the previous month.......

Karvy KSTREET - 23

RBI Focuses on Growth Instead of Inflation:

The central bank has prioritized growth over inflation by reducing rates by 25 bps. After all, the outlook for global growth has deteriorated. The Indian economy has faced a liquidity deficit......

Karvy KSTREET - 22

From The Desk Of Research Head

Firstly, despite this being an interim budget, this is certainly a non routine budget. It is a mildlyexpansionary budget, largely with the upcoming elections in mind, but has done so without breakingthe bank...

Karvy KSTREET - 21

Indian IT sector overcoming Automation fears

With the Nifty IT Index up by 8% within the past year, IT stocks witnessed a stellar rally, outperformingother sectors in Indian equity markets. The December quarter earnings from India’s leading IT firmsrecommend that the market’s optimistic bets were right...

Karvy KSTREET - 20

From The Desk Of Research Head

The current year is likely to shape up as a good year. In the first half, the equity market is likely to move sideways due to the overhang of the General Elections.....

Karvy KSTREET - 19

From a Reformist Government to Populist Government - Will Modi play his trump card now?

Citizens who belong to the middle class are to some extent relieved after the government latelyslashed GST rates on various goods and services. Thereafter, the sense on the street has been prettyclear that the incumbent government is likely to turn to....

Karvy KSTREET - 18

2019 – A year of economic optimism in India

With the start of the New Year 2019, the equity market is likely to emphasize onsome important economic events like bank recapitalization, populist measures in the interim budget, impact of farm loan waivers...

Karvy KSTREET - 17

Gold, Equities, USDINR and Crude Oil - The essential gearsof Financial Markets working in unison

Gold, equities, USDINR and crude oil prices have similar characteristics such as asset price inflation and momentum. They are significantly correlated with each other and with the business cycle.

Karvy KSTREET - 16

Tightened Immigration rules in the US, an opportunity for Indian IT companies to evolve higher

The current mulling of the US Immigration and Citizenship Services (USCIS) to take back the existinglottery system for H-1B visas wasn’t a surprising one. Stricter immigration laws and modification ofvisa rules became a foreseeable....

Karvy KSTREET - 15

The recent slide in Bitcoin showcases the burst bubble

Identifying the illogical soaring of bitcoin prices, the Indian regulators did the right thing by keeping the bitcoin at bay which helped the investors from incurring steep losses...

Karvy KSTREET - 14

A Less Hawkish Central Bank

As expected by consensus, the Reserve Bank of India opted to keep policy rates unchanged. The RepoRate remains at 6.5%. The Monetary Policy Committee also chose to retain the policy stance to thatof “Calibrated Tightening”....

Karvy KSTREET - 13

GDP recorded 7.1% growth in Q2FY19.

The Indian economy grew at 7.1% YoY during Q2FY19 vs. the consensus estimate of 7.4%. DuringQ1FY19 GDP grew at 8.2% YoY. This indicates growth is on track to roughly meet RBI estimate of 7.4%growth for the entire fiscal year......

Karvy KSTREET - 12

INDIA’S CURRENCY SWAP AGREEMENT WITH JAPAN; A RELIEF TO THE INDIAN RUPEE.

The bilateral currency swap agreement with Japan might be an important initiative taken by the government of India to support the depreciating rupee....

Karvy KSTREET - 11

UNSECURED LOANS MAY EXPOSE BANKS TO UNFORESEEN RISKS

It is not at all a surprising fact that Indian banks, that burnt their fingers on large project loans to some renowned conglomerates...

Karvy KSTREET - 10

CRUDE OIL CRACKS LOWER FOR 10 DAYS IN A ROW- ITS LONGEST LOSING STREAK SINCE JULY 1984

In our earlier communication, we had opined our bearish stance on Brent Crude oil when it was hovering around $80-$85 per barrel mark last month...

Karvy KSTREET - 09

Shubh deepawali

Samvat 2074 gave fantastic returns to investors and traders for the first quarter until January 2018. However, the tide changed completely as global headwinds began to weigh heavily on Indian markets. ...

Karvy KSTREET - 08

Market Correction Brings New Investment Opportunities

The turmoil in equity markets, since the end of August, has been accompanied by some deterioration in the macro-outlook for India. Despite the deterioration...

Karvy KSTREET - 07

Falling Rupee, a concern for Indian Economy

One of the major headlines and a cause of political cry by opposition parties these days is depreciation of rupee against the US dollar. This week we shall focus on understanding its causes and effects. The following reasons can be majorly attributed to the same. ...

Karvy KSTREET - 06

VOLATILITY – A MAJOR CONTRIBUTOR TO MARKET DYNAMICS

Volatility has always been the flavor of the markets. Along with volatility, market rallies and correctionsgo hand in hand. But why are we talking about volatility now? Well, the situation across the streetis pretty tense and most retail participants are panic stricken at the moment. Panicking and makingirrational decisions in horrid times is human nature....

Karvy KSTREET - 05

RBI Maintains Neutral Stance

Surprisingly, RBI didn’t hike rates and maintained status quo. Repo rate stands unchanged at 6.50%. This indicates that the decision is conventional and more directed based on inflationary targets.....

Karvy KSTREET - 04

The Indian economy is facing twin challenges

rupee depreciation and higher crude oil prices. Indian rupees depreciated by 11.7% YoY during 9MFY18 and by 5% MoM in September 2018....

Karvy KSTREET - 03

Panic in NBFC space: Rating downgrade for IL&FS and its subsidiaries

ICRA on 17th Sept downgraded IL&FS financial services Ltd (IFIN) a subsidiary of IL&FS from A4 to D (default) and further the company has been removed from the rating watch list...

Karvy KSTREET - 02

From The Desk Of CEO

The decade-old events of September 2008 continue to remain afresh in our memories. It was nothing less than the doomsday...

Karvy KSTREET - 01

Nifty not a hostage to Rupee depreciation, Economic and corporate earnings’ outlook is bullish

2018 has been marked by turbulence in markets, with the latest arising out of the depreciation of the Indian Rupee...