Sunday, September 3, 2023

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 Sagar Lele, Founder of Rupeeting. He also manages the All-Weather portfolios.

Finally Back to Life ⭐

After 5 weeks of falling, the Indian markets saw its first weekly gain last week. What led to the sudden bounce?

1. India’s GDP growth for the first quarter of FY24 came in at 7.8%, which hit a four-quarter high. This was also above consensus estimates, and extremely strong compared to the growth struggles of the rest of the world.
2. GST collections continued exhibiting strong growth, at 11% YoY to Rs. 1.6 lakh crore in August 2023. Growth was on similar lines even last month, in July 2023. The strength in GST collections is possibly reflecting a strong start to the upcoming festive season, which will continue contributing positively to growth.
3. Auto sales showed strength across the board - Maruti Suzuki’s sales were up 18% YoY, Mahindra at 19%, Hyundai at 9%, Eicher Motors at 29%. Auto sales typically are a strong indicator of underlying economic activity, and August sales have been very encouraging.

India however wasn’t the only place to see positive moves last week. Globally, markets were quite buoyant:

• The US markets bounced as jobs data reflected an addition of 187,000 jobs in August (third month of <200,000 job additions), and at the same time had the least number of job openings in two years, while unemployment also moved up to 3.8%. A slowing job market addresses a key risk for higher rates, and makes a case for slower inflation
• Chinese markets too were positive as improvement was seen in manufacturing output, domestic consumption and employment. China is also gearing up for fiscal stimulus and monetary policy to support growth. This was also reflected in the prices of several chemicals and base metals, aiding support to those sectors on the Indian markets as well.

The hinderance now only remains high inflation, which came in at 7.4% in July 2023. All eyes will be on the inflation data for August, which will be released on September 12, 2023. The data is not expected to be very encouraging as prices of vegetables still remained high.

However, the RBI expects inflation to start lowering September onwards, led by a fall in prices of tomatoes, and because of steps taken by the government including reduction in LPG prices and restrictions on exports of rice.

But on the other hand, with a recovery in China, metal and oil prices have already started showing sharp upwards movement. Inflation is likely to continue being a cause of anxiety for some time now, despite all the positive economic activity.

Idea - Stylam 🏠

Whenever you ask someone to get you a photocopy of something, chances are that they say. “Just Xerox it”, but what most people may not know that Xerox was the company to bring in the photocopying machine, making it as popular it has been since the 50’s!

In the same manner, when you get your house decorated, you may have heard the carpenters or contractors suggest that you put new “Sunmica”. While they mean that you need to apply new decorative laminates on your furniture, the brand that was launched in the 60’s as a joint venture between Bombay Burmah Trading Corporation and Formica International, became synonymous with the product.

Laminates are just sheets that cover furniture, counter-tops, and wardrobes - an economical home decor item with protective and decorative capabilities, making it an Indian household classic that mimics the grandeur that comes from wood and marble, but for a fraction of the cost.

It is no wonder that the market itself has grown into a Rs. 10,000 crore one now, from about Rs. 3,500 crore in 2017 (19% CAGR over 6 years).