Vijay Kumar Gaba

“Generation gap” has perhaps been a subject of study, discussion and debate ever since beginning of civilization. The new generations have been adopting new ways and methods of living, and the older generations have been rejecting these ways and methods as degeneration. The human civilization has evolved, regardless of this persistent conflict between experience and experiment.

It could be matter of debate whether experience is good as a guide or driver. But in my view, there is no doubt that the innovation (experiment) of new ways and methods of living and doing things has been the primary driver of the human civilization so far.

With the advancement in science and technology, the life span of people has increased materially in post WWII era especially. This expansion in life span has material impact on the dimensions of “generation gap”. The gap which was historically visible mostly between grandfather and grandsons is now sometime visible even in siblings born 5-6yrs apart.

In Indian context, the people who grew up in the socialist ear of 1970s had a very different mindset from the Maruti generation of 1980s. The star war generation of satellite television era of 1990s abandoned the 80s mindset; was soon rejected as outdated by the Google generation of 2000s. The people growing up in post global financial crisis era skeptical about the idea of globalization and free markets, but are free from the constrained mindset of thinking in local terms. They are at ease with creating global corporations and thinking in terms of billion dollars. The generation that will grow up in post COVID-19 era, may have a very different outlook towards life and work.

In this context it is interesting to note the results recent study conducted by Bank of America (BofA) Securities’ Global Research. The key highlights of the study could be listed as follows:

·         The Zillennials or ‘Gen Z’ (as BofA refers to the current generation) have never known a life without Google, 40% prefer hanging out with friends virtually than in real life, they will spend six years of their life on social media and they won’t use credit cards. They’re the ‘clicktivists’: flourishing in a decade of social rights movements, with 4 in 10 in our proprietary BofA seeing themselves as ‘citizens of the world'. The Gen Z revolution is starting, as the first generation born into an online world is now entering the workforce and compelling other generations to adapt to them, not vice versa. Thus, about to become most disruptive to economies, markets and social systems.

·         Gen Z’s economic power is the fastest-growing across all cohorts. This generation’s income will increase c.5x by 2030 to $33tn as they enter the workplace today, reaching 27% of global income and surpassing Millennials the year after. The growing consumer power of Zillennials will be even more powerful taking into account the ‘Great Wealth Transfer’ down the generations. The Baby Boomer and Silent generation US households alone are sitting on $78tn of wealth today.

·         Gen Z could be EM’s secret weapon. APAC income already accounts for over a third of Gen Z’s income and will exceed North American and European combined income by 2035. ‘Peak youth’ milestones are being reached across the developed markets – Europe is the first continent to have more over-65s than under-15s, a club North America will join in 2022. In contrast, India stands out as the Gen Z country, accounting for 20% of the global generation, with improved youth literacy rates, urbanisation, and rapid expansion of technological infrastructure. Mexico, the Philippines and Thailand are just a few of the EM countries that we think have what it takes to capitalize on the Gen Z revolution.

·         Gen Z is the online generation: nearly half are online ‘almost constantly’ and a quarter of them will spend 10+ hours a day on their phone. In our survey, over a quarter of Gen Z’s top payment choice was the phone, while credit cards weren’t even in their top 3. This generation is the least likely to pick experiences over goods, and values sustainable luxury – choosing quality over price as their top purchase factor.

·         Only half of US teens can drive, while our survey finds that less than half of Gen Z drink alcohol, and more than half have some kind of meat restriction. A third of them would trust a robot to make their financial decisions. Gen Z’s activist focus filters into their interactions with business, too – 80% factor ESG investing into their financial decisions, and they have also driven consumer-facing sustainability campaigns, such as single-use plastics. Harmful consumer sectors, such as fast fashion, may be the next focus.

SEBI relaxes cash segment margin norms for non F&O stocks

SEBI has increased the margining requirement for the non F&O stocks traded in cash segment, vide circular dated 20 March 2020. SEBI had also tightened the rule regarding market wide limits for individual stocks available for trading in F&O segment. The objective of increasing the margin requirements and tightening the exposure limits was to control the volatility, ensure market stability and orderly conduct of the market in view of the COVID-19 related concerns.

With effect from today, the enhanced margining norms for non F&O stocks traded in cash segment stands withdrawn. The restrictions on exposure to F&O stocks have also been relaxed. This implies that the market regulator now see lesser risk of market disruption due to COVID-19 related events and news.

The move has generally been received as positive for a rally in mid and small cap stocks. In past couple of weeks, many brokerages have published report favoring investment in mid and small cap stocks. For example, Edelweiss recently revised its outlook for small and mid cap stocks. A note from brokerage stated:

“The Q2FY21 earnings as well as the outlook beat expectations for most Small- & Mid-caps (SMIDs). Importantly, this led to 5–20% earnings upgrades for FY22 for nearly 63% of our coverage SMIDs; another 10% of SMIDs wallowed in 20%+ earnings upgrades. We like category leaders and—so far—this has helped our model portfolio outperform SMID indices by ~4% (over the past 12–15 months). We now include more recovery plays as sequential improvement plays through, having a bearing on stock performance.”