Dear Reader,
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.
Urban buyers of packaged consumer goods have been holding back from their usual purchasing pattern. In contrast, rural consumers are piling on goods in their shopping cart. This dichotomy has been a source of worry for investors in FMCG stocks. Urban markets contribute significantly to sales and even more to profitability due to higher share of consumption of premium products. The pandemic’s effect has been felt most in urban areas and an online survey by market researcher NielsenIQ puts some numbers to it.
Before the pandemic, people in Indian cities who were keeping a close watch on spending was 10percent compared to the global 17percent, indicating we were better off. Post-pandemic, nearly two in three people living in cities (64percent) said they have experienced a worsening in financial conditions and are consciously watching what they spend, compared to the global figure of 46percent. Another 25percent in Indian cities say they have turned cautious. That does not augur well for FMCG companies and the economy too.
It’s not surprising then that the OECD estimates that the long run cost of the epidemic is the highest for India among large economies. The long-term impact is calculated by comparing GDP projections prior to November 2019 with the latest projections. You can read more in today’s Chart of the Day: Chart of the Day | OECD says long-run costs of pandemic highest for India to know more.
Why are stock markets so buoyant then, if the long term prognosis not looking great at the moment? One answer may lie in the two-speed nature of growth seen among listed and other firms as well. A recent Motilal Oswal Research note using RBI‘s data on listed company performances points out that listed companies saw their gross value-added increase by 14percent each in the September and December quarters over a year ago in FY21. But the implied growth in GVA for the rest of the economy was only 3.4percent in the December quarter, although much better than the 6.7percent decline in the September quarter.
In short, the state of the economy is vastly different compared to what listed company results are portraying.
Here are today’s investment insights from our research team:Procter & Gamble Hygiene and Healthcare: Defensive stock growing at double digits
Should investors look at these leaders of auto ancillary pack?
Associated Alcohols – Worth taking a sip
What else are we reading today?
Why continued equity outflow is a concern for mutual funds
Oil at $70 could be the new normal
Will rising oil prices hasten a rate hike in India?
SBI Life and Max Life ride recovery, but will LIC queer the pitch in FY22?
Ola Electric’s ambitions could leave traditional two-wheeler makers playing catch-up
Greenwashing in finance: Europe’s push to police ESG investing (republished from the FT)
Third tranche of sovereign gold bonds up for early redemption: Should you withdraw?
Technical picks:HCL Tech, L&T Infotech, M&M Finance and Ambuja Cements (These are published every trading day before the markets open and can be read on the app)
Cheers,
Ravi Ananthanarayanan
