Sunday, October 16, 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 Sagar Lele, Founder of Rupeeting. He manages the All-Weather Portfolios at Rupeeting.
It was one more week dominated by inflation. Consumer prices in the US were up 8.2%, slightly lower than the previous month, but still above expectations, and way above for Fed’s comfort. But inflation isn't really stopping consumers in the US.
Consumer spending ticked up despite higher interest rates and higher prices. Delta Air Lines and American Airlines both reported strong sales despite fares that are off the roof. Pepsi reported 9% revenue growth as people continued munching on Cheetos and Lay’s.
But here’s the thing - India is showing similar trends. There’s no stopping or slowing consumption, despite higher interest rates, and high inflation.
Now some would say this is seasonal and festive, but here’s the thing - even comparable numbers (festive to festive) are up and about.
While the markets continue to bear the brunt, declining by 7% over the last twelve months, and by 1% YTD, consumption seems like a decent wave to ride on. After all, the Nifty FMCG index is up 15% YTD.
<aside> 💡 Our view: We continue to be cautious about Indian equities in the near term. Sticky inflation and economies not slowing down enough are fuel for central banks to further tighten screws. That said, to safeguard portfolios we’ve been on the hunt for relative safety, and exposure to sectors like FMCG has helped in the last few months. We also find relatively safety in Defence, Infrastructure, Cement and Automobiles.
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IT stocks, one of the worst-performing this year, have seen a downfall in the range of 16% to 43% among top players. Yet, TCS managed to come out with mere bruises in comparison to its peers. Its 2Q performance was a beat on all counts: