Do it yourself

  Logistic sector (Jefferies Equity Research) Formalisation of the logistics sector is a multi-year theme that should play out. We adjust our numbers for lower international cargo volume growth seen in 3QFY23, but believe that follow-ups to the National Logistics’ Policy (NLP), continuing GST driven organised players’ share gain, Dedicated Freight Corridor (DFC) traffic increase, Concor privatisation should play out in 2023. NLP targets dropping logistics costs to less than 10% of GDP from the current 14-15% with initiatives including 1) Integration of Digital System (IDS) 2) Unified Logistics Interface Platform (ULIP) 3) Ease of Logistics (ELOG) and 4) Network Planning Group (NPG) and System Improvement Group (SIG). Under the IDS, thirty different systems of seven departments will be integrated and will include data of the road transport, railways, customs, aviation and commerce departments. We believe results will take time but systematically the government will reduce red ta...

  It was summer of the year 1997. The equity markets in India were struggling to come out of a four year long directionless phase. Though globally the technology sector had started to excite the investors, nothing much was happening in India. It was arguably the most dreary phase in the Indian stock markets in a decade. The National Stock Exchange used to follow a weekly settlement system in those days. Under the weekly settlement system, trades done during a week beginning every Wednesday and ending on the subsequent Tuesday were clubbed together and the net result of those trades was settled in the next three days. The net funds due were paid to the clearing corporation on Wednesday. The net sold securities were delivered on Thursday. The new fund receivable and net securities purchased were received on Friday. All deliveries were in physical paper form. A weekly settlement cycle ended on Tuesday, the 20 th of May 1997. The pay-in of funds due was made on Wednesday, the 21 s...

  The Financial Stability Report released by the RBI a few weeks ago, highlights the external sector challenges being currently faced by the Indian economy. The report however seeks to dispel the fears of any balance of payment crisis like 2013. It also assures about the adequacy of reserves to handle the present situation and stability of the INR. External sector facing challenges India’s merchandise trade deficit increased to a staggering US$198.3bn during April-November 2022, as compared to US$115.4bn in the corresponding previous period. Strong headwinds emanating from still elevated commodity prices, global economic slowdown, volatile capital flows and higher imports due to adverse terms of trade shock continue to exert pressure on India’s external account.  Rising oil import bill limits policy flexibility; CAD rises sharply India’s share in global crude oil consumption increased from 3% in 2000 to 5.2% in 2021. India presently accounts for almost 20% of each barre...

If we cut the noise and overcome our recency bias, Indian stocks have given a decent return over the past five years; though this period had been particularly eventful. We witnessed the worst pandemic in over a century crippling the world. A variety of economic and geo-political conflicts impeded the global economy. The financial markets witnessed unprecedented liquidity deluge that led to over US$20trn bonds trading at a negative yield; followed by sharp monetary tightening. The world moved from severe deflationary conditions to sharp inflationary spikes. Central banks cut the policy rates close to zero (even below zero in some cases) and then hiked the rates at the fastest speed in five decades. In the domestic economy, we saw macro parameters like inflation, fiscal deficit, current account deficit etc. worsening sharply. We witnessed a monetary easing and tightening cycle. Banks went through a massive credit cycle. The benchmark Nifty50 has yielded an 11.4% CAGR over the past fi...

Capital goods and consumer durables (Nirmal Bang Institutional Equities) In 3QFY23, the Capital Goods companies may record strong revenue growth for the Capital Goods companies (+30.3% YoY) on the back of robust order booking. In the Consumer Durables segment, demand collapsed in Nov’22 after a good Oct’22 before recovering again from mid-Dec’22. Consequently, we expect 17.3% YoY topline growth for Consumer Durables companies. For Consumer Electricals companies, we estimate 10.7% YoY topline growth, backed primarily by channel filling of non-rated fans ahead of the impending transition to new BEE norms. Also expect up-stocking of Wires & Cables by dealers and distributors as copper prices have risen by ~18% from July’22 lows. Capital Goods and Consumer Durables companies are expected to show margin improvement as most of the companies are most likely to have exhausted high-cost inventory by mid-3QFY23. Consequently, expect a sequential improvement in aggregate EBITDA margin (+4...

Last week, the National Statistical Office (NSO) released first advance estimates of the National Income for FY23. These estimates are important because the budget estimates for FY24 would be based on these estimates. The finance ministry will use these estimates to project the GDP, savings, tax revenue, expenditure and allocations for various sectors of the economy. Some key highlights of the data released by NSO could be listed as follows: FY23 real growth (2011-12 prices) GDP (at 2011-12 prices) may increase by 7% to against 8.7% in FY22. This estimate is marginally higher than the RBI’s latest estimate of 6.8%. Per capita GDP may increase by 5.8% to Rs1,13,967, in FY23, against a growth of 7.6% in FY22. Per capita private consumption may be Rs65,237, a growth of 6.6% over FY22. FY23 Nominal Growth (current prices) GDP may increase by 15.4% to US$3.3trn, against 19.5% growth in FY22. Per capita GDP may grow by 14.2% to Rs1,97,468 (US$2394), against a growth of 18.4% in FY22. Per cap...

It's less than two weeks into the new year and I have already faced multiple instances of ethical dilemma. These instances not only tested my resolve to avoid all kinds of ethical conflicts, but also raised doubts about the health of the Indian economy and sustainability of some new age business models. Let me first briefly describe some of these instances: ·           I booked a doctor consultation for my daughter through a popular healthcare service portal. The doctor insisted that in future we should book consultation directly with the clinic instead of coming through the portal. ·           I lodged a service request for our out of warranty washing machine with the concerned German Appliance company. The service engineer visited within 3hrs and repaired the fault. While leaving he handed over his private business card and requested that in future we can call him directly; and he will charge onl...

Joshimath is an important town in the Chamoli district of Uttarakhand, in the Garhwal Himalayas. It is the entry door to the sacred temple of Shri Badrinath; and also winter abode for the deity. It hosts the northern monastery (one of the four sacred Hindu monasteries established by Sri Adi Shankracharya); and a critical cantonment for the Army establishment posted to protect the northern borders with China (Tibet). It is also the gateway to famous winter sport venue Auli and several other Himalayan trekking destinations. Over the past three decades it has evolved from a sleepy mountain village that would witness some life during the six months Char Dham pilgrimage; into a busy town bustling with activity all-round the year. Recently, Joshimath has been in the news for the wrong reasons. About 20000 inhabitants of Joshimath are living in extreme fear as their homes have developed big cracks; and could collapse anytime. Besides, some important temples and other establishments have a...

Chemical Sector (SMIFS Limited) Our chemical channel checks suggest that slowdown in dyes, pigments, FMCG, etc still persist in December 22 and increasing central bank rates across countries to control inflation is weighing heavily on the demand & prices of commodities chemicals. Although commodity chemical prices are witnessing a rebound from the bottom in anticipation of strong demand in the coming months and minimal channel inventory. Despite global headwinds, India remains on a strong footing in chemicals led by increasing interest of global companies to source from India to de-risk their supply chain, increasing share of specialty chemicals in overall product mix and robust capex aligned by chemical companies to capture future growth. Since, China is relaxing its COVID curbs hence demand is expected to remain robust, although Chinese New Year which starts from 22nd January and ends on 5th Feb 23 can be a short term demand dampener. The trends are mixed and so the commo...

In the US, banking panic started at regional level in 1930, with many smaller regional banks faced crisis. However, as Great Britain decided to leave the gold standard for GBP on 21 September 1931, the panic spread throughout the country. Foreigners became concerned that the US may also follow Great Britain and end gold convertibility of USD. There was a rush to convert USD into gold. The collateral was that depositors became concerned about the safety of their money and started withdrawing currency from their accounts. A global rush to convert USD into gold and an internal rush to withdraw currency from banks drained out the banking system reserves and choked the money supply – exacerbating the deflation and propagating the great depression. There was a spate of bank failures in the US during 1931-1933. The Federal Reserve Bank of New York responded to the situation by hiking rates in October 1931, to encourage investors to deposit money in the US banks or buy US bonds. There was an i...

  The Government of India has rolled out an integrated food security scheme effective from 1 January 2023. The new scheme shall remain effective till 31 December 2023. The scheme is estimated to cost the central government rupees two trillion. Under the scheme, the government would provide 5kg food grains per person to Priority Households (PHH) beneficiaries and 35 kg per household to Antyodaya Anna Yojana (AAY) beneficiaries, free of cost. The scheme has apparently subsumed two extant food subsidy schemes of the central government, viz., (a)   Food Subsidy to Food Corporation of India (FCI) for discharge of obligations under The National Food Security Act, 2013 (NFSA). Under this scheme Under the scheme, 5 kg food grains per person is provided to Priority Households (PHH) beneficiaries and 35 kg per household to Antyodaya Anna Yojana (AAY) beneficiaries at a subsidized rate of Rs 3 per kg for rice, Rs 2 per kg for wheat, and Rs 1 per kg for coarse grain. (b) ...