Moneycontrol Pro Panorama | A New Year or just another one?

The economy is staring at a cyclical slowdown.

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The Panorama newsletter is sent to Moneycontrol Pro subscribers on market days. It offers easy access to stories published on Moneycontrol Pro and gives a little extra by setting out a context or an event or trend that investors should keep track of.
We are off to a shaky start in the new year, much like the careful steps of a person coming out of a pub after a night of overindulgence. Markets seem to want to tiptoe into the next 52 weeks instead of barging in with the victories of the year gone by. The S&P 500 has laid low and emerging markets are even more unsure of their direction. Why?

Because the uncertainties of 2024 continue to remain. The Russia-Ukraine war is still on and the tensions in Middle East are only getting complicated. China’s economic problems are yet to see decisive solutions and despite several signs, investors are none the wiser on how a Donald Trump presidency would look like. For Indian markets, there isn’t much to rejoice. The economy is staring at a cyclical slowdown, the rupee continues to touch new historic lows and the Reserve Bank of India (RBI) has flagged off the risk of weakening household balance sheets.

There are the red flags raised by the RBI’s financial stability report which pointed out that lenders need to brace for a rise in retail delinquencies, all thanks to their indulgence in unsecured lending last year. Banks have anyway tightened their loan underwriting standards, something that is visible in the deceleration of credit growth in the past quarters. Dinesh Unnikrishnan details here how more loans are now going towards building factories and less towards consumption. That said, consumer credit continues to grow in double digits.

Of course, the good things remain too. The latest household consumption expenditure survey shows that rural poverty fell below 5 percent for the first time. The survey also showed that overall poverty has reduced. At the same time, the survey fits rather oddly with the current premiumisation trend in the Indian economy. We highlighted the same in this piece which states that the top 5 percent of households reduced their consumption expenditure. Incremental consumption, though, seems to hold the premiumisation narrative.

What does all this tell investors? Ananya Roy, in her column, explores the themes that investors could pursue in 2025. One of the critical factors is the expectation surrounding consumption revival. Most investors believe the government will announce measures in the Union Budget next month to boost consumption if it wants to sustain economic growth. Can the government deliver on the same? We have a month to find out.

Meanwhile, the Centre needs to get on with its capital expenditure where the target is Rs 11 lakh crore and only 37 percent of it has been achieved. There is hope that the government would speed up spending in the final three months of fiscal year 2024-25 in capex even though meeting the target looks difficult. The money should inspire the private sector to put their own funds into making India’s factories hum a little faster.

Should investors bet on India’s manufacturers or on the odds of the average household turning big spenders again? Investors seem to be spoilt for choice, especially if the consumption revival comes along with a capex binge from the government. That could set the markets up for another rally despite the snub from foreign investors. But there is enough to fret for equity investors this month as companies come up with their quarterly report cards.

The story is different for the bond market, though. The beginning of a benign interest rate trend, a sustained domestic demand for long-term bonds and a favourable inflation outlook would ensure that bonds make money for investors this year. We highlight in our column here the bond market’s prospects for 2025.

We entered this year with the usual forecasts for 2025 from various corners of the markets. But forecasts are just that. In this insightful FT piece, free to read for Moneycontrol Pro subscribers, Tim Harford explains the forecasting paradox and the usefulness of scenarios. Making a timely forecast on a global consequence is near impossible, but anticipating the future is important enough. Prospective hindsight is an exercise worth practising wherein investors can assume the upcoming challenges as true and prepare for them.

Is 2025 a new year or just another year? That depends on how we employ prospective hindsight on our portfolios.

Investing insights from our research team

Weekly Tactical Pick | Cello World: This consumer ware player is set to clock accelerated growth

December’ 24 auto sales: PVs in fast lane; CVs, tractors pick up momentum

Shaily Engineering Q2: Operational excellence matches strong fundamentals

What else are we reading? 

Budget Snapshot: Fiscal deficit track record got better in current decade

Metals' outlook in 2025 rests on one country’s fortunes

Predictions for 2025: Future of commercial real estate

In 2025, will Indian business finally unleash its innovation potential?

China’s central bank plans policy overhaul as pressure mounts on economy (republished from the FT)

‘When I am about ninety I will re-evaluate whether the institution of the Dalai Lama should continue or not’

RSS baiters need to understand the organisation, it is ‘Ajatshatru’

Markets

India’s largest small-cap fund manager sees greatest value in large-caps. Shailesh Raj Bhan on 2025 outlook, strategy, risks

Tech and Startups

Infosys, HCLTech, Wipro, Tech Mahindra bet big on Agentic AI in 2025

Technical Picks: GOLDBEES, LODHA, VOLTAS, L&T.

Aparna IyerMoneycontrol PRO