This Diwali season was seen as critical from the economy as well
as financial markets view points. Most businesses observers, analysts and
policy makers were keenly watching the festival consumer demand to assess the
future direction of the economy and markets. The policy makers were especially
interested in assessing the impact of the various stimulating and corrective
measures taken in past few months to boost demand.
It will take some time to know the real picture. However, what
we know from the news snippets and anecdotal evidence collected from the market
visits and speaking to the traders and shop keepers in past few days, the
season has been a mixed one.
The following key trends may be noteworthy in this context.
1. The move from the
unorganized to the organized retailing may be happening at much faster pace
than earlier estimated. The experience is somewhat similar to the mobile
telephoney - where almost everyone waited to see the growth till it actually
happened. Even the telecom companies were surprised by the depth and width of
the subscriber growth.
In retail trade also, defying the logistic challenges, the
e-commerce companies have penetrated the hinterlands with great force. Amazon
and Flipkart recorded a rise of 33% in Diwali sales this year. Amazon achieved
50% market share in merchandise, while Flipkart had 73% in appliances. Amazon
reportedly delivered goods to 99.4% of India's pin codes of which 88% customers
were from non metros. (see
here)
Future group reported that "Frequent shoppers were
outnumbered by those seen as more conservative and typically don’t splurge as
much." (see
here)
Most of the small unorganized retailers even in posh metro
markets bemoaned a dull festive season.
From stock market view point this is perhaps good news. Though
overall economic impact would be negative during the transitory phase as a
large majority of marginal businessmen go out of business.
2. Gold sale was estimated
to be lower by up to 40% from last year (see
here). However, the anecdotal evidence indicates to a huge shift from the
smaller jewelers to the large corporate jewelry brands. From the stock market
view point therefore this could be a good news as the listed players like
Titan, PC jewelers etc may report decent growth despite poor overall gold
demand.
Lower preference for gold is a good news for economy (lower CAD)
and markets (better growth for the large corporate jewelry retailers.
3. Auto dealers reported
decent sales. Some car dealers indicated that inventory that has piled up has
diminished considerably and discount numbers have also eased considerably in
past 10 days or so. The Chairman of Mahindra group was reported as claiming
double digit sales growth during Diwali. (see
here)
4. Dry fruits and
confectionary sales were reportedly muted as corporates scaled down gift values
considerably. This may not have any negative implications for the stock markets
as no major player is listed. However it may again be good news for economy
(lower imports and hence lower CAD) and lower A&P spend of corporate and
therefore better profitability (though only marginally).
From these organized retail and revival in auto demand could be
derived as two investment themes to further work on.
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