Do it yourself

The political forces of all hues and colors have set out to join the battle for supremacy in 2024. Most non-political forces have also declared allegiance to the two primary alliances. There are few yet to join any of the main groupings; maybe they are waiting for some assurances about their roles during and after the battle. However, one thing appears certain – this battle is like the battle of Mahabharata, in which staying neutral is not an option.

The narrative and rhetoric

Both alliances are trying to set a narrative to influence the voters in preparation for the battle. As usual, the narratives are based on rhetoric and the promise of a better future. On the basis of several official statements, promotion campaigns, and media reports I decipher the following narratives and rhetoric to support these.

The NDA narrative could be briefly explained as – “Under the brilliant leadership of Prime Minister Narendra Modi, India is progressing fast to become a major global economic and strategic force; obliterating the decades of poor performance. Prime Minister has worked hard to end nepotism, corruption, & minority appeasement; and is putting India on the path to becoming an economically developed and socially just society. The opposition alliance on the other hand is a motley group of irrelevant political forces lacking any credible leadership that can match the charisma of prime minister Modi.”

The rhetoric to promote this narrative includes:

·         Prime Minister Modi is the most popular and charismatic leader in modern India.

·         The size of the Indian economy has grown exponentially in the past nine years of the NDA regime. Improvement in India’s global GDP rank to number five; the sharp acceleration in GST and Income Tax collection, and strong GDP growth despite a global slowdown are cited as key achievements of the incumbent government.

·         The stature of India has grown to unprecedented levels under the leadership of Prime Minister Modi. The successful Covid Vaccine diplomacy

·         Social schemes like Support money to farmers; Free food to 800 million citizens; Health Insurance for all BPL families etc. have transformed the lives of the majority of the population.

·         Infrastructure capacities have been built at an unprecedented pace in the past nine years. In particular, the construction of new highways and airports, expansion and electrification of the railway network, the introduction of faster and better trains, etc. are cited to highlight the achievements.

·         Abrogation of Article 370 of the Constitution, the Construction of a grand Ram Temple in Ayodhya, the beginning of the process of introduction of a Uniform Civil Code; and accelerated enforcement action on corrupt, etc. are cited to highlight the strong delivery performance of the incumbent government.

The I.N.D.I.A narrative could be briefly explained as - “Prime Minister Modi is leading a totally corrupt, divisive, opaque, oppressive, and undemocratic government. A few ‘friends’ of the prime minister have been favored to the detriment of the national interest. The society has been deeply divided on the basis of religion and caste. There is no transparency in the operations of the government. The leadership is misusing the state enforcement agencies to oppress the opponents. The spirit of federalism has been compromised as resource flow to the states being government by non-NDA parties is constricted and the existence of many of these governments is consistently threatened. Hence, the NDA alliance is not conducive to the very idea of INDIA.”

The rhetoric to promote this narrative includes:

·         The meteoric rise of certain industrial groups, considered close to the NDA leadership in the past nine years.

·         The country has witnessed a significant rise in communal tension in the past nine years. The secessionist forces have gathered strength in the past nine years.

·         Many duly elected state governments have been displaced using unfair means.

·         The government has miserably failed to deliver on its promise of inclusive growth as inequalities have risen sharply in recent years.

·         The government mismanaged the Covid-19 pandemic.

·         The government has mismanaged the price (inflation) situation in the country thus adversely affecting the poor people most. Besides, the government has failed to deliver on the promise of providing employment.

·         The NDA has inducted a large number of opposition leaders it has been accusing of corruption. It has threatened opposition leaders and parties of enforcement action to gain their support.

·         The government has compromised national security, allowing China to intrude in the Indian territories.

·         The government has been opaque in many important matters like electoral bonds, PM Cares Fund, Rafael Deal, etc.

·         The government lacks federal spirit.

·         The government has not only failed to protect women but has also harbored many accused of abusing women. The rise in crime against women and communal violence has undermined the global reputation of India.

It is obvious that the narrative is built around the problems being faced by the country. The most unfortunate part is that no one is bothering to offer any solution. We have not heard much about the solutions. For example, almost every citizen of the country is aware of the inflation problem. No one needs to be told about this problem. What they want to know is how this problem would be resolved.

In the subsequent posts, I shall list the problems that need to be resolved and also suggest some solutions.

The election carnival in fact begins six months early with some key states holding elections for their respective state legislative assemblies. Historically, the correlation between the results of state assembly elections and the subsequent general elections has not been significant. For example, in 2018, the ruling NDA lost all four state elections (Madhya Pradesh, Rajasthan, Chhattisgarh, and Telangana) but went on to win the 2019 general election with a huge majority. Regardless, these elections would be contested and watched keenly.

A large majority of the population in India mostly depends on government policies for their basic survival needs like food, education, healthcare, etc. It is, therefore, natural that elections attract keen interest from the people. The political parties do their best to present an agenda that would appeal to the immediate needs, desires, and/or aspirations of people, in their endeavor to influence voting preferences of the electorates. On the flip side, a part of the population, which does not avail of direct public benefits like free food, education, medicine, old age pension etc., is seen to be avoiding active participation in the election process. This makes the voting percentages low – ranging between 55-65%.

In the forthcoming elections, ideally, the voters’ preferences ought to be influenced primarily by—

1.    Comparative evaluation of the ten-year (2004-2014) performance of the Dr. Manmohan Singh led United Progressive Alliance (UPA) government with the ten-year (2014-2024) performance of the incumbent prime minister Narendra Modi led National Democratic Alliance (NDA);

2.    Agenda for the 2024-2029 terms presented by the incumbent and the challenger; and

3.    Confidence in the capability of the incumbent and the challengers to deliver on their respective promises.

In practice, however, it is seen that the voters’ decisions are often influenced by the latest popular narrative and rhetoric. Many a time, the strongest narrative and loudest rhetoric win, regardless of the actual performance, vision, programs, and capabilities to deliver.

In preparation of the battle for power in 2024, the battle lines have been drawn. As per the latest reports, 38 political parties have joined hands to contest 2024 general elections as part of the National Democratic Alliance (NDA) led by the Bhartiya Janta Party (BJP); while 26 political parties have come together to form a new alliance christened the Indian National Developmental Inclusive Alliance (I.N.D.I.A.). Apparently, the new alliance shall be contesting the 2024 elections under collective leadership and a common agenda.

In the course of this week, I shall share my views on the agenda, narrative, and rhetoric that may be used to influence the voters’ preferences by the two sides; and how the smaller parties who have not yet aligned with the two main groupings may influence the final outcome.

From the developments, events, and engagements in the past two decades, it is evident that India has been making credible efforts to sustain an affirmative engagement with the global community. These efforts include opening the Indian economy to the global business community; actively participating in global alliances and forums; developing social and physical infrastructure; committing to global agreements in the areas like economic cooperation, climate change, transparency in fund flows & investments, crime prevention, terrorism, etc.

These efforts have been made at three broad levels –

(i)    At the state level through suitable changes in policy framework. This includes, inter alia, deeper strategic alliances with Western countries (civil nuclear deal, QUAD, etc.); bilateral (free) trade agreements, liberalized FDI regime; BRICS and G-20 cooperation; etc. The vaccine diplomacy during Covid was a significant effort in wider global outreach by the Indian state. The Indian state’s resolute refusal to align with any side in the ongoing Russia-Ukraine conflict is widely cited as a good example of its strategic efforts to stay non-aligned while protecting its interests.

(ii)   At the private enterprise level through deeper and wider engagement with global businesses. This includes deeper and wider engagement with global technology leaders and innovators; making large-scale investments in foreign countries (Corus, JLR, Novelis, to name a few); providing competitive manufacturing platforms (mobile and white goods manufacturing) to global brands; partnering with global leaders to produce/Service in India for India and world; etc.

(iii)  At the individual level through the deeper and wider engagement of Indian citizens (or persons of Indian origin) with the global community – business, governments, civil society, academia, scientific research, art, and culture. The number of students admitted to various courses in foreign universities has risen exponentially; so has the role of Indian professionals in the senior-level management of top global enterprises.

These efforts have indubitably earned wider acceptability for India’s official narrative across the global socio-political spectrum.

However, it cannot be denied that India’s internal struggle to redefine its socio-economic identity as an “ultra-nationalist free market economy with a socialist overtone” has allowed various interest groups and lobbies to challenge the credibility of India as a democratic secular system with equal opportunity and progressive outlook. These interest groups have been building a strong narrative to dissuade the global communities from further deepening their engagement with the Indian state. This narrative could have influenced global opinion to some extent, as reflected in a much slower pace of progress in trade, FDI, VISA regulations, technology transfer, nuclear cooperation, etc. I also see the recent spurt in separatist movements, like the Khalistan movement, adverse press coverage during the prime minister’s foreign visits, etc. as an extension of this trend only.

These interest groups appear to have the tacit support of the local politicians, intelligentsia, civil society members, etc. who are either opposed to the policies, methods, and style of functioning of the incumbent government; or are struggling to find a space for themselves in the scheme of things.

In this context; I find the India narrative in the recent issue of The Economist (July 15the-21st, 2023). The 78-page issue has the following 7 mentions of India. The economic mentions are all bracketed with China which has over 100 mentions in the magazine.

1.    At least ten people were killed in election day violence in West Bengal. The Indian state went to the polls to choose rural councils. Dozens of people have died in violence in the state since the election date was called a month ago.

2.    In a setback to India’s ambition to become a global hub of chipmaking, Foxconn, best known for assembling the iPhone, pulled out of a $19.5bn joint venture to develop semiconductors at a factory in Gujarat. The deal had been announced with much fanfare last year. Press reports suggested the project had been held up by the government’s dithering on state support.

3.    India’s central government is subsidizing a Micron factory in Gujarat to “assemble and test” chips, spending an amount equal to a quarter of its annual budget for higher education.

4.    India’s attempt to boost its mobile phone industry appears to have brought mainly low-value assembly work. The lesson from South Korea is that national champions must be exposed to global competition and allowed to fail. The temptation today will be to protect them, come what may.

5.    While he is gradually being welcomed back into the Arab world, Mr. Assad hopes his multifaith policy will help him end his isolation elsewhere. Yoga has helped him strengthen ties with India.

6.    Vietnam, which is hardly friendly towards China, has adopted some of its methods for controlling data. Authoritarian regimes are not the only ones to slide toward digital protectionism. India insists data must be stored locally: to give its law enforcement agencies easy access, to protect against foreign snooping, and as a way to boost investment in the tech sector.

7.    India’s “Make in India” strategy hopes to boost the industrial share of the economy to 25% of value added by 2025. In China and India industry’s share of economic output appears to be roughly where it was three decades ago, but even in these countries, it has slipped in recent years.

Despite the efforts of local officials and strong geopolitical incentives for Apple to move away from China, India has struggled to become anything other than a destination for the device’s final assembly

The oft-lauded superior productivity growth of manufacturing—versus services as well as agriculture—comes with caveats. Economists have found that financial, it, and legal services can boost productivity elsewhere, including in industry. According to the IMF, the gap between manufacturing and services productivity growth has shrunk in many countries since the turn of the millennium. In China and India, its direction has flipped, with service productivity rising faster.

The following podcast of The Strait Times, featuring Mr. Sanjay Baru, a geo-economist and commentator who was Media Adviser to Prime Minister Manmohan Singh also makes an interesting listening in this context.

‘Closet Nehru’ Modi has played Indian foreign policy well

India macro outlook (Gavekal Research)

India’s economy is at an inflection point. The damage wrought by the pandemic still lingers, weighing on private-sector demand. But there are nascent signs that the government’s focus on investment spending is starting to pay off. Moreover, inflation is cooling more rapidly than anticipated, paving the way for policy to turn more supportive. These macro tailwinds, along with geopolitical currents, favor continued outperformance by Indian equities, despite their high valuations. By contrast, the rupee and Indian bonds are likely to remain anchored at current levels.

GDP growth accelerated to 6.1% YoY in 1Q23, from 4.4% in 4Q22. The pick-up was largely driven by a sharp rise in investment, led by government spending on infrastructure. Growth in the fiscal year to March 31 (FY22-23) was 7.2%, a better-than-expected outcome, albeit slower than the 9.1% recorded in FY21-22.

•      A combination of high public-sector spending, monetary policy easing, and an improving external environment will buoy growth ahead of elections in April-May 2024. Cooling inflation should give the central bank room to cut rates later this year, while an upturn in the global trade cycle will reduce the drag from negative net exports.

•      Although weak private consumption and investment remains a concern, both are showing signs of green shoots. We expect GDP growth in FY23-24 to slow to 5.5-6%, with the balance of risk tilted to the upside.

The inflation outlook has improved quicker than anticipated, paving the path to easier monetary policy. Fears that El Niño would disrupt India’s monsoon and put upward pressure on food prices have not played out. But bond yields are unlikely to fall far, given that fiscal deficit targets could be breached as election spending ramps up.

1QFY24 - Margin expansion to stay; heed demand growth (Elara Capital)

Profit boost from lower input costs to continue

Expect the broad theme of margin expansion to likely continue in Q1FY24, with lower input prices as the key contributor. Sectors that may benefit are FMCG, Power, Pharma, Auto (also helped by product price increase), Agrochem, Infra, Alcoholic Beverages, Aviation and Paints. Key exceptions may be Consumer Durables and Cement, wherein subdued demand and high-cost historic inventory may likely play spoil-sport.

Metals/Chemicals may be hit by lower commodity prices

Lower commodity prices may hit profitability of Metals and Chemicals in Q1. Expect EBITDA/tonne for Elara Steel universe to contract in INR 1,300-16,000 YoY/INR 1,950-3,850 QoQ range in Q1E. Also, cumulative EBITDA margin for Elara Specialty Chemicals universe may drop to 21.2% from 22.8%/23.4% in Q4FY23/Q1FY23 as prices correct on rising supply from China.

Financials – Growth strong, but higher funding costs to show up

Expect stable loan growth, high treasury income and low credit costs to continue benefitting banks/NBFCs. However, higher funding costs due to interest rate hikes may show up sharply in Q1FY24. Since lending yields are unlikely to have repriced materially, NIM may contract QoQ. Heed the extent of the decline, which may determine the trajectory of changes in forward estimates. Within NBFCs, financiersin micro/CV/power/MSME domains may be the growth leaders.

Management commentaries – Monitor ‘domestic demand’ focus

The key monitorable should be management commentaries on domestic demand scenario, especially rural demand. Loan book growth guidance by banks, comments on residential real estate demand and large capex guidance may be the other key factors to watch for from a macro perspective. Among sector-specific comments, global demand outlook for IT and US generic market pricing for the Pharma sector may be crucial.

Q1FY24 – Top picks

Expect Q1 results to strengthen momentum in Auto, FMCG, Pharma, Real Estate and Power sectors. Our top picks in these sectors include Maruti Suzuki India, TVS, Hero Motors, Tata Consumer, Zydus Lifesciences, Prestige, Brigade and NTPC.

We also expect select banks – ICICI Bank and IndusInd Bank – and some NBFCs – PFC, MMFS, CREDAG and SBICARD – to deliver results in-line or better than market expectations. Major weakness in Metals/Cement stocks due to weak Q1 may be an opportunity to add positions in these sectors.

India Strategy: Aiming for a new orbit (Prabhudas Lilladhar)

NIFTY has given more than 10% return in FY24 YTD led by resilient domestic demand and USD14bn of net FII flows. India continues to be epitome of global growth with 6.5%+ expected GDP growth for FY24 (highest globally) even as growth is slowing down in US and Europe is embracing recession.

India has witnessed revival in FII inflows (Strong global markets) and we expect the same to sustain post USD23bn outflow in last two years and decline in FII ownership by 300bps to 20.3%. Given strong domestic growth, declining inflation (Food and Fuel), revival in industrial capex and strong Infra push by GOI and demographic dividend, we expect sustained traction in FII inflows to continue. We estimate that FII inflows of USD35.7bn to increase market ownership by 1%. Rural India is showing green shoots post and soft inflation and favorable monsoons can accelerate demand further in a pre- election year.

We remain positive on Auto, Banks, Capital goods, Hospitals, Discretionary consumption and Building Materials. El Nino and 2024 elections remains a key risk. Stable Govt. post elections and continuation of economic policies can take markets to next level.

We estimate flat sales, 48% growth in EBIDTA and 81% growth in PBT of coverage universe. Ex oil & Gas, we estimate 30.6% growth in EBIDTA and 30% in PBT. Auto, Banks, Oil and Gas, Capital goods and travel will report high growth.

1Q24 is actually first normal quarter after 1Q20, devoid of any covid wave during the quarter or base quarter. Demand scenario is mixed, with some green shoots in 2-wheelers and FMCG in rural India. Urban discretionary spending shows seasonal uptick in QSR, strong growth in Jewellery while other segments are depressed. However, travel, tourism, and spending on marriages continues to show strong growth.

Global commodities continue to soften as fears of recession following sharp increase in global interest rates continue to weigh on prices. The impact of softer commodities has started to reflect in price reductions selectively.

Banks, Travel, HFC’s, Auto and capital goods will report strong growth. Consumer, Hospitals, Pharma and Telecom will report moderate growth in sales. Agri, Building materials and Oil and Gas will report decline in sales on lower product prices. Auto, travel, pharma, oil, and Gas will report sharp margin expansion. Auto, Travel, Building materials, capital goods and durables rank high in PBT growth.

NIFTY EEPS has seen an increase of 1.3/2.0% for FY24/25 with 16.3% EPS CAGR over FY23-25 with FY24/25 EPS of Rs1024/1171. Our EPS estimates are 3.9% and 3.7% lower than Bloomberg consensus EPS estimates.

NIFTY is currently trading at 18.3x 1-year forward EPS, which is at 12% discount to 10-year average of 20.8x.

Base Case: we value NIFTY at 12% discount to 10-year average PE (20.8x) with March25 EPS of 1171 and arrive at 12-month target of 21430 (21013 based on 18.2x March 25 EPS of Rs1148 earlier).

Bull Case, we value NIFTY at 10-year average (20.8x) and arrive at bull case target of 24353 (23878 at LPA PE).

Bear Case: Bear case Nifty can trade at 25% discount to LPA (25% earlier) with a target of 18264 (17909 earlier).

Model Portfolio: We remain overweight on Auto, Banks, IT services, capital Goods and Healthcare. We are Underweight on Metals, Cement, Consumer, Oil & Gas and Diversified Financials

India and US Equities: An odd tale of two markets (Kotak Securities)

The divergent performance between large-cap. and mid- and small-cap. Stocks in India and the US markets in the past few months may reflect a combination of hype and reality regarding certain developments in the two markets. The large-cap. stocks continue to be general laggards in a recovering economy in India, while the mega-cap. stocks are leaders in a slowing economy in the US. Both markets could be reaching their limits, given economic (US) and valuation (India) headwinds.

India: Long tail wagging the dog

The muted performance of several large-cap. stocks in the past 3-6 months has been a drag on the overall market performance despite the strong performance of other large-, mid- and small-cap. stocks (see Exhibit 2).

The recent revival in the performance of a few large-caps suggests the market is either (1) finding value and/or (2) seeking safety in large-cap. stocks.

India: Valuation headwinds

We are not sure how to explain or interpret the odd movement in the Indian stock market. Large-cap. stocks typically lead mid- and small-cap. stocks in bull-market rallies but the current rally is the other way around. ‘Liquidity’ seems to be most-cited argument among investors about the rally in smaller names, but that presumably reflects bullish sentiment among domestic institutional and retail investors. Foreign active (institutional) investors are unlikely to chase smaller stocks and passive (retail) investors will deploy money into ETFs with a disproportionate weight of large-cap stocks. Valuations are expensive in India, a natural headwind for the market.

US: Long tail is struggling somewhat

The strong performance of a few mega-cap. stocks in the past 3-6 months has been a driver of overall market performance despite rather muted performance of other large-, mid- and small-cap. stocks.

The 6-8 technology-oriented mega-cap. stocks have performed presumably on expectations of them dominating the emerging AI space. However, we note that the AI landscape has several large players, unlike the segments that the megacap. companies have dominated for the past 10-15 years. Each of the segments such as consumer electronics, cloud, e-commerce, search and social media has only 1-2 dominant players even now. AI will see each of these entities pitted against each other, a very different landscape compared with the landscape when these companies and industries first emerged and achieved scale.

US: Economic headwinds

We are not sure if the AI-driven rally in the US market will sustain against the harsh reality of (1) high interest rates for an extended period of time, as the US Fed strives to tame demand and inflation and (2) eventual slowdown in household consumption as and when some of the current factors (tight labor markets, excess household financial saving; supporting household sentiment and spending fade.

India Cement Sector: Rock-solid competition (UBS Securities)

Contrarian negative view on rising competition and expensive valuations: In the near term, we expect strong earnings in the next two quarters to be driven by robust demand and margin tailwinds, but any sharp uptick in stock prices could offer good opportunity for booking profits. Strong demand is likely to slow after the general elections in May 2024, and fresh capacity is rising fast and likely to exceed medium-term demand, in our view. We expect players to resort to pricing to grow or defend market share, as Adani’s entry to the sector significantly intensifies competition. Also, contrary to consensus, we see limited room for value-accretive M&A. With valuations of 15x one-year forward EV/EBITDA and 30x FY25E PE for a sector tracking close to GDP growth rate, rising competition, low entry barriers and return profile of low double digits, we see little room for potential upside. Structurally, we would sell any rally, not buy the dip.

Margin tailwind for now but pricing is fading and may worsen on overcapacity: Despite strong demand and high utilisation, prices were flat in Q1 FY24, in what is normally a strong quarter for price hikes. Pricing is where we see the big negative delta in the medium term: competition is likely to intensify with about 110mtpa of capacity coming onstream in the next 2.5 years versus incremental demand of 70m. The top-five firms (47% of the sector's FY23 capacity) guide for aggressive capacity expansion at 8-14% CAGRs in the next 5-7 years, whereas cement volumes in India have grown at 5-6% CAGRs or 1-1.2x GDP over the past three decades, creating excess capacity risks.

Companies resorting to organic expansion while inorganic deals dry up? Facing overcapacity, we expect companies to defend their market share. Unlike consensus, we see little scope for value-accretive M&A for the top-five firms. Our analysis of the next 23 largest firms (about 44% of FY23 capacity) reveal they also have good performances and capacity expansion plans. There is limited incentive to sell for the top 6-28 companies and balance sheet strengths provide a buffer to absorb margin hits from weak pricing. We therefore believe notable market share gains from the top 6-28 companies remain difficult for the top-five firms – organically or inorganically. This raises the threat of overcapacity or expansion lagging guidance. Both are de-rating risks for an expensive sector in the 90th percentile of its five-year valuation range.

Household debt growth at 21-quarter high in 4QFY23 (MOFSL)

India’s non-financial sector (NFS) debt grew at a seven-quarter low of 11.5% YoY in 4QFY23/1QCY23 (quarter-ending Mar’23), vs. 12.6% YoY in 3QFY23. Outstanding NFS debt touched USD5.4t (or INR446.7t) in 4QFY23, equivalent to 164% of GDP, down from its peak of 180.9% in 4QFY21 but up from 161.8% in 3QFY23.

In real terms, however, total debt (using GDP deflator) grew 7.1% YoY in 4QFY23, the highest in the past 11 quarters. Nevertheless, the growth was still lower than the average growth of 8-9% YoY witnessed during the pre-Covid period.

Within NFS debt, non-government non-financial (NGNF) debt also grew at a four-quarter low of 10.7% YoY in 4QFY23, while government debt jumped 12.3% YoY over the quarter. Within the NGNF sector, household (HH) debt spiked at 19% YoY in 4QFY23 – marking the highest growth in 21 quarters – driven by a decade-high growth of 20.8% YoY in the non-mortgage debt segment. Corporate debt, on the other hand, rose by just 4.6% YoY during the quarter – the lowest in seven quarters and more than half of 11% growth reported during 1HFY23. This weakness in corporate debt is in line with the dip in corporate investments that we had highlighted in our earlier report.

An analysis of NGNF debt by sources/lenders suggests that scheduled commercial banks (SCBs) and NBFCs posted strong lending growth, while HFCs’ outstanding loans grew 4.3% YoY in 4QFY23. Corporate Bond (CB) issuances and commercial papers (CPs), however, declined during the quarter. External/foreign borrowings grew decently.

A comparison of India’s NFS debt vis-à-vis a few other major economies confirms that while India’s debt-to-GDP is, by far, the lowest, it is much higher than other developing economies, except China.

Passenger Vehicles to grow at 7-9% After a Stronger FY23 (CARE Ratings)

The passenger vehicles (PV) industry is likely to record moderate volume growth of around 7-9% in FY24 as the pent-up demand levels off amid hike in vehicle prices. Further high interest rate, erratic monsoon expectation given EL Nino effect and subdued exports volume is expected to restrict volume growth.

However, strong order book, improvement in supply chain and semi-conductor supplies, robust demand for new model launches and increasing demand in the sports utility vehicle (SUV) segment is expected to keep the sales momentum rolling.

·         The demand remains healthy across both passenger cars and utility vehicles. Utility vehicles are likely to grow by 9-11% while passenger cars & vans are expected to report moderate growth of 5-7% in FY24.

·         With an improving penetration rate, electric vehicle volumes in the PV segment are likely to clock around 1 lakh for FY24. Monthly electric car sales have gradually improved in the previous two years from fewer than 1,000 units to around 8,000 units and are expected to continue at similar levels.

•      Average inventory holding with dealers is expected to reduce from the current 45-49 days in the following months due to expected strong sales momentum in the upcoming festive season beginning August 2023.

The PV industry is likely to record moderate volume growth of around 7-9% in FY24 as the pent-up demand levels off amid a hike in vehicle prices, high-interest rate environment and subdued exports volume growth on account of a global economic slowdown amid inflationary concerns. Strong order book, improvement in supply chain and semiconductor supplies, robust demand for new model launches and increasing demand in the sports utility vehicle (SUV) segment are expected to keep the sales momentum rolling. The demand for premium variants is expected to remain healthy led by increasing demand for the luxury and premium models, while the demand for entry-level variants is expected to continue to remain under pressure due to high-interest rates and an inflationary environment.