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.
By now, you would have read enough about how companies need to unleash animal spirits by investing in new capacity. Higher private sector capex spending can reduce the pressure on the government, which has been doing the heavy lifting on the investment front. While the government and bankers have been telling companies to go forth and spend fearlessly, the response has been less than satisfactory.
While there could be several reasons for their reluctance, such as higher interest rates or having purged their balance sheets of excess debt only recently, the strength of domestic consumption may also be playing on their minds.
The rural consumer, for example, is in a far weaker position than the urban consumer and this has been the case for some years now. From a time when rural demand for FMCG goods was growing at a multiple of urban demand, the situation is now reversed. But there are some bright spots, too. Rural consumer sentiment has picked up of late, as has urban consumer sentiment. If these stay the course, then demand too should recover. Today’s Budget Snapshots talks about these trends.
There are worry spots in urban demand too, with the December quarter results seeing sectors such as paints and durables showing some weakness. Two-wheeler sales have for a very long time now been seeing depressed demand and even sales of entry-level cars have been affected. Thankfully, the demand for premium goods — whether in FMCG or durables or automobiles — has been resilient and has given companies cover till the other segments regain their full health.
One way of approaching this problem of weak consumption is to pin it on external problems. Once those problems solve themselves, the situation should improve. While the economy was slowing down pre-pandemic, the lockdowns did hurt several sections of the economy. But that is in the past. Then, there’s the inflation shock that has hit on multiple fronts, such as fuel, food and then became broad-based. Slowing inflation trends mean this could get resolved soon.
The budget is all about deciding how much to allocate to different priorities. In today’s edition, for example, our contributors have written about how the budget should approach allocations to the healthcare andtransportation sectors. These are sectors that lead to a multiplier effect, in terms of quality of life and productivity of citizens and creating infrastructure that’s around for decades.
Taking steps to spur consumption, in that sense, is akin to jumpstarting a drained battery. It’s not a lasting solution. But there are also times when it is needed when nothing else is working. Is it the case now?
When the economy is pegged to grow at 7 percent in FY23 and then to just below 6 percent next year, the need for a stimulus is not visible from the numbers. But the dichotomy in consumption does open the window for a debate on whether there needs to be a better redistribution of income. Will the budget include any measures to spur consumption in pockets where signs of economic distress are evident is a question that will be answered in a few days from now. If the budget does make those efforts and they are seen as being significant enough to boost consumption, then companies may well decide that the time to invest is now.
Investing insights from our research team
What does Adani saga mean for banking stocks?
Strong show by Sona BLW, best proxy to ride the EV mega trend
Vedanta: Higher dividend payout likely to continue in the short term
Apcotex: Is it time to chip in?
Seshasayee Papers: Profit surges in Q3 FY23 with sustained margins
Bharat Electronics: Growth, valuation tailwinds blow in favour of investors
What else are we reading?
No need to panic in the market
Budget 2023: What the fintech space expects from the FM
The Eastern Window: China’s border aggression presents a tactical challenge
Startup Street: Startups no different from run-of-the-mill businesses
ChatGPT will find its students. Key for teachers is assessing the good and bad of learning from AI
The world is not ready for the long grind to come (republished from the FT)
Budget 2023 needs to play the hard ball on fertiliser subsidy
Half-baked truths in Kerala governor's public address
A better anti-coronavirus vaccine needed to prevent transmission and long COVID
ChatGPT will find its students. Key for teachers is assessing the good and bad of learning from AI
Technical Picks: USD-INR, Punjab National Bank, Guar gum, L&T, Dr Reddy’s Lab and ITC (These are published every trading day before markets open and can be read on the app)
Ravi Ananthanarayanan
Moneycontrol Pro
