My yearly predictions for Samvat 2081 in the political, economic and financial landscape:
- After a ~28% y/y move in the Nifty50, the Indian market finds itself under an anchor of high valuation, slowing earnings growth and reduced domestic enthusiasm. Nifty does not cross the 27,000 mark (~11% up from today) and it becomes, once again, a stockpicker's market
- Irrespective of who wins (although I'd bet it is Trump who becomes the next President of the United States), the worries of spending and deficit amidst a polarized country keep yields high and the US 10Y GSec does not drop below 4%
- Similarly, global worries about conflict and the increasing deficits in Government spends drive people towards alternatives in reserve currencies, and we see new lifetime highs in Gold and Bitcoin
- Quick commerce's continued momentum in disrupting all forms of retail continues in full force. Displacement of industry/ jobs become part of news narrative. Government regulation/ action of in the form of higher taxes, FDI in retail regulations or the like is seriously considered, if not implemented.
Zomato
/ Blinkit anticipates the Retail FDI weakness in its dark store franchisee structure and becomes a domestic majority-owned company (hence the proposed $1b fund-raise in my view)
- National champions (top 20 groups of India - Reliance, Adani, Tata, JSW, Torrent, Murugappa, RPSG, Inox GFL etc.) continue to drive the majority of private capex aligning with India's priorities to invest in strategic sectors such as electronic manufacturing, semi conductors, space communications, power infrastructure and the like. Likely re-entrant in this circle: Reliance ADAG Group. More deals resembling China's One Belt One Road project are done by Indian private companies in South Asia and Africa, flexing India's new-found financial power.
- After more than 2 decades of IT/ITes backed rise of an urban white-collar workforce, India starts to witness real inflation and catch up in blue-collar skilled worker wages especially in specialized areas such as plumbing and electricals. This has already played out in a big way in the US (https://www.wsj.com/business/entrepreneurship/plumbers-hvac-skilled-trades-millionaires-2b62bf6c), and I expect to see earnings of such workers cross entry level IT workers (~INR 3 lakhs per year or INR 25k/ $300 per month). Not sure how one can track this prediction
- Fortune is at the top of the pyramid. Consumption patterns among the top 0.1% will resemble more and more the rich of Western countries than the rest of India. Sales of luxury items such as apartments priced above 10cr ($1.2m), hi-end cars above 50L ($60k), luxury watches (INR 5L/ $7k), exotic holidays, Coldplay tickets etc. continues to reach new highs. This will be seen not just in metros such as Mumbai and Delhi but also in the next 15 cities of India - think Jaipur, Ahmedabad, Bhopal, Raipur, Surat, Lucknow etc.
It's been a year since WOTS#6 when I started making these predictions, an ideal time to look back and check how I fared. Good to know that I have been right or at least, partially right across 7 of 7 predictions, although if I were honest, it speaks more to my good fortune than anything else to be honest.
New comments in bold italics
- Notwithstanding the view of global investors on how expensive the Indian market is (if you see past the articles, data indicates significant FII selling Aug 2023 onwards), domestic investment will keep the market buoyant and the Nifty does not go below 18,000
Right. One way up in the market and Nifty never touched 18,000 backed by domestic liquidity
- ‘Higher for longer’ will continue as Powell and the Fed keep the interest rate cycle going and the 10Y US Treasury Bond (currently 4.65%) does not drop below 4%
Partially Right. US10Y GSec dipped to 3.7% after the 50bps rate cut but came right back to 4.3% in weeks.
- An era of ‘national champions’ is reborn in India – Reliance, Adani, Tata, Birla, Murugappa and JSW companies become ‘growth platforms’ as Government policy nudges promoters to invest in new manufacturing, technology and infrastructure sectors. The Tata-Wistron deal becomes the first of many
Right. National champions expanding all around: Tata + Murugappa enter semi conductor manufacturing, JSW Acquires MG Motors, Adani acquires infra projects in Africa and so on
- Power demand continues to rise sharply pushing ahead of supply growth. Outages/ load-shedding becomes a topic of discussion around the 2024 elections and power capacity addition becomes a national priority
Right. Power shortage peaks in summer 2024 and Government announces increased capex in power/ transmission. Power stocks continue to zoom
- Quick commerce (Zomato's Blinkit, Swiggy's Instamart and Zepto) transform Indian retail and upend the value chains of both FMCG and retail companies. I estimate their combined GMV is already at ~50% of DMart today and growing ~80-100%. One or both of Reliance and Avenue Supermarkets (D-Mart) enter this space in a meaningful manner organically or via acquisition.
Right. Unless you are living under a rock, it is undisputable that Quick-commerce has changed Indian retail, delivering everything from rangoli colours to gold coins in 10 mins. Reliance announces entry in quick commerce
- Honasa Consumer Ltd. (Mamaearth)’s stock, despite all the social media around their headline numbers, outperforms the FMCG basket for the next year by being one of the few avenues to play the consumer growth story in India
Right. Honasa outperforms most FMCG stocks but admittedly, it's been close
- Serious seed/ VC Money starts flowing into manufacturing creating an avenue for technocrats/ professionals to pursue their entrepreneurial ambitions in this sector. A growth wave begins deepening India’s manufacturing base serving global supply chains.
Partially right. Deals have started to happen but not at the pace one would have expected
CFA CHARTER I INVESTOR I PASSIONATE ABOUT EQUITY MARKETS.
4 个月In your opinion, What is the amount of penalty that can be levied on Zepto for FDI rule violation, as their sellers(inventory) are indirectly controlled by Zepto though Zepto doesn't have any equity in entities who act as inventory holders?
Alturas Investment Management | Analyst - Investments & Research | CFA Level 3 Candidate
4 个月Insightful, Please write WOTS more frequently. Its been a great source of learning for me. Thanks