Do it yourself

FY24-25 Macro and Strategy Outlook (Phillips Capital) The Indian economy will go through a phase of softness and consolidation in FY24 due to the higher base of the last two years, steeper interest rates, and a global slowdown. Supportive government policies and the long-term potential of the Indian economy will continue to augur well for capital formation, but other GDP components like consumption and exports are expected to weaken in FY24. Corporate earnings are currently estimated to be extremely strong but we expect disappointment and cuts ahead. So far, growth and inflation have been fairly resilient, but we anticipate weaker trends in FY24; weak demand should dent pricing power, keeping inflation under control in FY24. Key advanced economies are not yet showing meaningful signs of slowdown/recession; so, elevated inflation and rising growth will lead to more interest rate tightening followed by rates being held higher for longer, which should lead to growth slowing down in 20...

  Recently, the growth in per capita GDP of India has been in the news. The government statistics claim that per capita income of India has almost doubled in the past nine years. This claim has generated intense discussion over the economic performance of the incumbent government; especially relative to the previous UPA government (2004-2014). Without getting into a political argument and keeping the statistics aside for a while; I would like the popular debate to take the following into consideration: ·           The last census of India was done in 2011. Therefore all “per capita” data points are using an estimated number of the population. There is a possibility that the actual number could be different from the estimates. ·           In the past twelve years there have been significant changes in the socio-economic and demographic structure of the country. The youth population has increase...

 Si tting on the banks of river Betwa, overlooking the majestic Orchha palace and Lord Raja Ram’s temple, I had a fascinating talk with two farmers from a nearby village. During the course of our discussion, I learnt that they are real brothers; have a family of 11 people, including grandfather, parents and five children aged 3yr to 13yrs including three sons and two daughters; own less than one acre of land and have been tilling another acre on rent; besides they own one cow. They mostly plant wheat during rabi season and vegetables in kharif and intermediate period. Caste wise they were from Kushwaha community that falls in other backward class (OBC) category. Their families are mostly dependent on government schemes for ration, education of children and healthcare. They live in a semi pucca house constructed five years ago with the help of government subsidy. They have six bank accounts for their family members, mostly used to receive various benefits from the government and o...

This is further to “No clouds on the horizon” posted last week. I made a rudimentary assessment of the potential impact on the financial market, assuming the monsoon rains are inadequate and/or prolonged heat wave conditions persist over a large part of north and central India, as anticipated by the weather experts. In my view, investment strategy needs a tweak to make it ready for a hotter and drier summer. Asset allocation An inadequate monsoon would essentially mean (i) persisting higher food inflation; (ii) higher fiscal support to the rural sector; (iii) high food credit demand; and (iv) higher short term yields. Raise some tactical cash I shall therefore like to raise some tactical cash from my equity allocation and deploy it in short term or liquid funds. I however do not see any case for changing the strategic allocation at this point in time. A sharper than presently anticipated correction in equity prices will motivate me to increase my equity allocation to “overwe...

Agriculture: Tight supplies from Australia (ING Bank) In its first estimates for 2023/24, ABARES estimates Australia’s agriculture supply to drop significantly next year due to dry weather as a result of El Nino. Among major crops, the department expects total wheat output to drop from 39.2mt in 2022/23 to just 28.2mt in 2023/24 whilst exports will also decline from 28mt to 22.5mt. Among other crops, sugar exports could fall 6% YoY to 3.5mt whilst canola exports could fall from 6.9mt in 2022/23 to 4.9mt in 2023/24. The latest trade numbers from Chinese Customs show that cumulative imports of soybean in China rose 16.1% YoY to 16.17mt over the first two months of the year, a record high for this time of the season. Healthy demand for soybean and concerns over a delayed harvest in Brazil pushed up imports of soybeans in the country. Meanwhile, the latest data from Ukraine’s Agriculture Ministry shows that the nation exported around 33mt of grains as of 6 March so far in the 2022/...

  In a press release issued last week, the Indian Meteorological Department (IMD) cautioned that during the upcoming hot weather season (March to May (MAM), above normal maximum temperatures are likely over most parts of northeast India, east and central India and some parts of north west India. Normal to below normal maximum temperatures are most likely over remaining parts of the country. IMD forecasts show an enhanced probability for the occurrence of heat wave over many regions of northwest and central India. As per the latest forecast of IMD, the currently prevailing La Nina conditions are likely to weaken and turn into a o El Nino Southern Oscillation (ENSO) neutral condition during the pre-monsoon season. It is pertinent to note that La Nina conditions are known to cause normal to above normal rains in India, while El Nino conditions are known to cause rain deficiency in India. Neutral ENSO conditions help a normal ( + 10% of long term average) monsoon. In India La Nin...

3QFY23 GDP: Slowdown in private consumption alarming (MOFSL) Real GDP expanded by 4.4% YoY in 3QFY23: Real GDP/GVA grew 4.4%/4.6% YoY in 3QFY23 (v/s our forecasts of 4.5%/4.1% and the Bloomberg consensus of 4.7%/4.6%). It implies that real GDP/GVA rose 7.7%/7.2% in 9MFY23. Importantly, there were upward revisions in FY21/FY22 growth to -5.8%/9.1% from -6.6%/8.7% earlier. The CSO expects 5.1% YoY growth in 4QFY23, which means full-year growth of 7% in FY23. Anything between 4.7% and 4.9% in 4QFY23 implies 6.9% growth in FY23 and 4.6% or below implies 6.8%. We believe that real GDP growth could be ~4.5% in 4QFY23, implying full-year growth of 6.8% in FY23. We maintain our forecast of 5.2% growth in FY24, led by weak consumption and some moderation in investments. Consumption growth collapsed, though investments grew decently: Details suggest that total consumption growth weakened to just 1.7% YoY in 3QFY23, dragged down by much weaker-than-expected growth of 2.1% YoY in PFCE and ...