Moneycontrol Pro Panorama | The economy is firing, but not on all cylinders

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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.

Data released over the past couple of days paint a divergent picture of the economy. On the macro front, exports were strong in December. The manufacturing sector, captured by the Purchasing Managers’ index, remained in expansionary mode even though growth moderated. Leading brokerage houses are predicting an upturn in the economic and capex cycle. The Nomura India Business Resumption index is at its highest level.

Concurrently, the CMIE data warn that the unemployment rate has reached a 4-month high. Automobile sales in December 2021 were weaker than expected. Retail and wholesale passenger vehicle and two-wheeler sales declined from the year-ago month in December, show calculations by Nomura Research. Commercial vehicles are the only bright spot.

“If the current momentum continues, there could be downside risks to our estimates for FY22F across most OEMs,” warn analysts at Nomura. OEM is original equipment manufacturer.

Demand for entry-level vehicles continues to remain muted. Price hikes, high fuel prices and delayed harvest have tempered demand in rural markets, points out Elara Securities.

The latest business update by the consumer goods company Marico supports the view. High inflation is impacting disposable incomes. Rural demand is sluggish though discretionary and out of home products gained traction on increased mobility. “Revenue growth in the (December 2021) quarter was in double digits, while volumes were flat, owing to the weaker consumption sentiment and a strong base,” Marico said referring to its India business.

Note that consumption in rural markets slowed amid unseasonal rains and crop damage in several parts of the country. A separate analysis by Elara Securities shows subdued electricity generation and demand in December 2021. COVID-19 and Omicron-related restrictions could derail recovery in contact-intensive services sectors, warned Nomura. Management commentaries during the December 2021 quarter results will provide more clarity on the demand situation.

Even then investors will have to deal with contrasting trends in 2022. Ruchir Sharma, author of ‘The Ten Rules of Successful Nations’, lists 10 economic Automakers end year on a mixed note 2022. Greenflation, Bubblets, Baby bust are some of the key trends to watch out for. Free to read for Moneycontrol Pro subscribers.

Investing insights from our research team:

Deep Value Series: Does distressed valuation of LIC Housing Finance present investment opportunity?

Automakers end year on a mixed note

Marico: Volume growth hit by slowdown in consumption, higher inflation

What else are we reading?

Story in charts | How did investment intentions do in the December quarter?

Economic Recovery Tracker | Improving sentiment is not reflecting in consumption

Crypto Conversations: Blockchain Outlook 2022 -- Trends to look out for

Strong despatches fuel Coal India growth, power demand key

Multiple hurdles ahead as India embarks on a new business cycle

Lex | Apple: $3tn market value could rise further with new products (republished from the FT)

Can law and order queer the pitch for Yogi Adityanath in Uttar Pradesh?

Picks from our technical analysts: Deepak Nitrite, Cerebra Integrated, Coal India and Tata Power (These are published every trading day before markets open)

R Sree Ram
Moneycontrol Pro