The World Bank and credit rating agencies have downgraded India’s growth for fiscal year 2021 with the lowest figures India has seen in three decades.
Government has announced a huge stimulus of Rs 20 Lakh crore. At as much as 10% of GDP, the package did not appear to leave any major sphere untouched as Govt brought out the fiscal artillery to complement RBI’s monetary ballast spread over the past few weeks, putting India firmly in the league of biggies that have gone all out against the virus. But that’s not all.
The amount of Rs 20 lakh crore was way above but it should be remembered that Rs 20 lakh crore is a combination of liquidity and actual money that will be pumped into the system. This may not mean that all the problems faced my SME and MSME may gone away with that. After all it all hinges upon the transmission of this measures, that is to say it reaches the desired industries is extremely important.
Many of the banks are coupled with good amount of liquidity but are they lending? Or Will they be lending?
Well if they are not lending then be it cottage industry or MSME or SME all are going to face problems. Let us assume that this banks starts lending, then people will be faced with another set of problems like how will they pay back loans. Mounting debt can be a ticking time bomb , it just can not be timed when it will explode but it will that would be for sure.
Currently the RBI has announced moratorium period but lot of people are taking it for granted , since only EMI’s are delayed while the interest cycle will keep on continuing.
In India up to 53% of businesses have specified a certain amount of impact of shutdowns caused due to COVID-19 on operations (FICCI survey).Various business such as hotels and airlines are cutting salaries and laying off employees. By 24 April the Unemployment Rate had increased nearly 19% within a month, reaching 26% unemployment across India, according to the “Centre for Monitoring Indian Economy”. Around 140,000,000 (14 crores) Indian lost employment in the lockdown. More than 45% households across the nation have reported an income drop as compared to the previous year.
Coming back to the moratorium , it may seem that by imposing moratorium RBI may have pushed NPA recognition a bit backwards . But when we look at the bigger picture of India , the lockdown may have put entire economy at halt as a result it is eminent that no matter what large number of instalments are going to pushed back beyond moratorium , how much of those can lead to NPA recognition will be know only later.
Further more the lockdown is more urban centric so a lot more activity can flourish in rural India. Also, a lot of labour is going back, so, there will not be a major labour shortfall there. But industries heavily dependent on the migrant labour will suffer significantly. With the government implementing schemes such as NAREGA, 100 DAYS WORK guarantee etc will come with their own challenges such as labourers would be leaning more to work in their home states or nearby areas as the opportunity cost of migration will be quite low.
While, if we look at the geographical context of India states such as Gujarat , Maharashtra etc and many more which are heavily Industry oriented and largely dependent on the migrant labours which generally are from the states like Uttar Pradesh , Bihar etc. This states will face huge shortages of labour and might be forced to work at lower capacities.
Monsoons are likely to be normal this year, some of the crop activity is going on well, hence with all of this together, rural India for the first time in many decades is getting a window of opportunity and can diversify beyond agriculture. (We have also suggested one such agriculture in this post. Please refer from the link below.)
Thus during this crisis if any growth that India will witness during the year will be mostly consumption led especially more led by non-durables than durables. Most of the non-durables are essential items, which is going to be probably the main source of growth over the next couple of month.
Therefore we do maintain our stance as said in the earlier posts that it may not be good time to get out and start buying no matter what. We have never been this bearish if you have been following us since past 2-3 years.
If we are wrong all you may loose would be an opportunity to make some decent money which as said may come again from time to time but if in case we are right and you didn’t follow us otherwise, it could make you loose a lot of money which can take way long than you think to recover.
Also one of the reasons that this week we are not suggesting any new stock is that in last few weeks even due to our clear warnings that new stock suggestions are meant for understanding only many of the users did buy them and sent us queries regarding the same.Therefore we have decided to take a break this week from providing any new suggestions.
One thing we want all the users want to remember , if you are not loosing any money than you are definitely making it because it is far more important to understand that sitting with a pile of cash is better then investing in the market and see your portfolio go down 10-15% with no hope of recovery in short run.
Sometimes suggesting no company is also equivalent to suggestion as it can be in itself a hint that time is not right. Be cautious.
Since past couple of weeks we have been getting lot of queries from various users seeking advice on the investments they had made and had fallen significantly. It was because most of those people did not read our weekly posts in full.
How can we be so sure about that?
Well, we have embedded some special check points and instructions in the posts. So if someone reads entire post he may be very well aware of what we want to convey and if someone just reads in half and posts query we can get the idea upto which point he/she might have read.
Also in a recent survey conducted it was found that people who did participate in darkhorsestocks past year were more efficient in timely allocation as well as exit from the markets. Since DARKHORSESTOCKS is completely free we therefore urge all the users to read the posts in full and take maximum benefit.
One thought on “Market Update 2.0”
This is one of the best analysis I’ve seen. Thanks for the excellent article.