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.
It’s that time of the year when the strength of consumption will be tested. Investors will be watching closely.
Yesterday, Avenue Supermarts announced that its popular neighbourhood store DMart’s sales rose by 36 percent over a year ago in the September quarter. Urban spending may be improving, but some growth may also be due to price hikes contributing to higher value growth. Also, physical stores have been snatching share back from e-commerce as retail therapy has returned in full force. But sequential sales growth is only 6 percent and given how inflation is trending, that’s not a very encouraging sign. When the detailed results are available, some more trends may become visible. Do read: Consumers are spending, but not on everything.
Marico, in its early quarterly update, said urban and premium consumption was doing okay, but rural downtrading continued as retail inflation is breaking the back of consumers. It expects things to improve in the second half, but for the September quarter, its India business’ volume growth was in low single-digits (below 5 percent). There’s another side of the picture. While input costs have fallen, companies are still dealing with higher cost inventory from earlier. Even then, Marico’s gross margins were higher over a year ago, but it chose to invest more behind advertising and sales to push sales. So, operating margins will still be lower, but it’s for a good cause. If all works out, then the second half should see higher sales growth on a lower input cost base.
How consumers think about income reflects in how they save and invest. We look at the upsurge seen in real estate sales, and even factors such as a rising interest rate cycle or an end to pandemic-era stamp duty concessions are not dampening buyer appetite. Housing sales rose by 87 percent in January-September over a year ago, according to Anarock. There are several reasons behind this trend, argues our columnist Shishir Asthana who believes this trend is here to stay.
While there are fundamental reasons for investor interest, one wonders if there’s a shift in how buyers are viewing real estate as an investment class. The sharp run-up in equities that has lasted for some years, especially after the pandemic, may not continue. Some investors may be better off taking some money off the table and putting it into an asset class they think could do better than it has in recent years. With gold returns too flagging in the face of a strengthening dollar, diversifying away from equity is not an easy task. Real estate may have regained some, even if not all, of its appeal to a certain investor class.But that’s still no reason for investors to turn their back on equities. Here’s a fund manager’s unique take on how FIIs have stayed the course for decades in India, earning them superb returns in dollar terms. “IRR of 8-11 percent in dollar terms need to be also evaluated in context of relatively lower cost of capital seen during most of last decade, as well as sub-par returns made in most other markets and asset classes (barring US). Allocators to Indian equities have been well rewarded,” writes Harish Krishnan of Kotak Mutual Fund. Do read.
Investing insights from our research team
What else are we reading?
Celsius Network founder withdrew $10mn ahead of bankruptcy (republished from the FT)
Russian oil price cap would save emerging markets billions, US says (republished from the FT)
Ravi AnanthanarayananMoneycontrol Pro