Sunday September 11th, 2022

Welcome to The Weekly, where our team shares a few thoughts to take you into the week. This week’s thoughts have been brought to you by Hardik Wakekar, who has been contributing immensely to Rupeeting’s investment and research.

There Will Be Dips, Just Keep Buying on Those!

“Those who ruled us for 250 years — we have left them behind to move ahead in the world economy.”, PM Modi said. “Now is the opportunity, we will not stop!”, he continued.

India’s GDP expanded by 13.5% in 1QFY23, the fastest in the last four quarters - primarily driven by agriculture and services. With this it also surpassed the GDP of the UK, becoming the 5th largest economy in the world.

The markets reacted positively to this, and rightly so!

• For 2022, the IMF has projected 7.4% growth for India, making India the second fastest growing economy in the world. Who’s first? Saudi Arabia - remember how oil prices have moved this year?!
• Along with the high growth, India has been proactive on stemming inflation too. The RBI has already increased rates by 140 bps so far over three meetings. While inflation inched slightly lower, global supply issues continue to remain.

However, the high growth gives RBI enough room to further hike rates. Not like we’re slipping into a recession.

So if growth is great, inflation can be tamed, money is coming in, what can go wrong?

1. The job market in the US is still super hot, and the Fed is committed to getting inflation under control. Rates will rise, the dollar will strengthen, and India’s deficit situation will worsen.
2. A recession in the US and in Europe mean lower global demand. This will impact India too. In a global economy that is so interconnected, India can’t escape slowdowns.

<aside> 💡 Our view: India’s on a long-term structural growth path, which bodes well for the markets. However, external shocks in the form of inflation, currency depreciation, slowing growth and liquidity outflow are factors which will keep pausing the market’s up move. There will be dips, just keep buying on those!

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An Idea - IRCTC

In October 2021, the government suddenly demanded 50% of IRCTC’s revenue generated from convenience fees - the fee charged by IRCTC while booking tickets online. Although this wasn't implemented, if it were, it would drag out nearly a quarter of IRCTC’s revenue - just like that!

Since then, IRCTC is marred by the risk of government intervention. But, it is also consciously added revenue streams, and has a tonne of potential in new businesses.