Indien November 2018

Ernte und Feste befeuern den Konsum

Indische Bauern ernten Reis auf den Feldern von Guwahati. Die Reisernte in Assam hat soeben begonnen und dauert bis Ende November. Die steigende ländliche Nachfrage trägt zum robusten Wachstum des Detailhandels bei. STR EPA / KEYSTONE

Auch wenn sich aufgrund der makroökonomischen Gegenwinde die Gesamtsituation (noch) nicht verbessert hat, befeuern gute Ernten und Festlichkeiten den Konsum. Chrys Kamber, Head of Indian Investments, mit ihren Insights zu Indien.

Liquidity in the Indian market is back to normal levels after the Reserve Bank of India’s (RBI) measures such as engaging in open market operations, reduction in statutory liquidity ratio and increase of the lending limits for banks to non-infrastructure non-banking financial companies (NBFC). Nevertheless, the dip in commercial paper and bond market issuance indicate that the NBFCs still face issues to access liquidity. But NBFCs with positive asset-liability mismatches steered clear of this situation. A couple of bright spots have emerged in the Indian economic landscape. Rural consumption growth is strong and will continue to benefit from the good autumn crop output in the second half of FY19. Overall credit growth has strengthened despite the NBFC dilemma and banks nonperforming assets were muted. Since the festive (Diwali and weddings) season has started with a one month delay, the November sales number will give further indication of the consumption trajectory.

Food inflation lower than expected

Inflation hovers around the RBI’s revised inflation trajectory. Specifically, food inflation lingers in the lower level which helps to offset to some extent the fuel inflation caused by high crude oil prices. Hence RBI has left the interest rate at 6.5% after their October policy meeting with a stable inflation forecast. Indian fiscal deficit utilization has already reached 95% of the budgeted amount for the current fiscal year leaving the government with little room for further spending. The recent announcement of a 3% stake sale in Coal India (government holds 78.3% stake) will provide roughly US$ 700 million and it has plans to raise US$ 14 billion through sales of state asset in the current fiscal year to bridge any potential gap of fiscal slippages.

Good news for retail

The 2QFY19 earnings reported so far were either above or in line with the estimates while few companies in IT, auto and financial sectors missed the estimates. However the broader picture did not improve as further earnings downgrades are expected due to the macro headwinds. Nonetheless, a closer look at the earnings reports reveal a robust growth in the fast moving consumer goods sector, pick up in rural demand and strong brand pricing power. Currently the market participants are closely watching the upcoming state elections (five states will go to assembly polls in November) outcome to reenter the market as the valuations at this point of time provide an attractive risk reward in the mid to long term.

All indices in the red area

All indices were in the red this month. The NSE Nifty 50 Index lost 6.9% while the Nifty Smallcap 100 Index and the Nifty Midcap 100 Index lost 3.4% and 1.8% respectively in USD terms. Padma India Fund posted a loss of 2.0% in October. It was a mixed performance within the sectors: energy, IT and materials sectors kept their positive trend while other sectors remained in the negative territory. On the stock level, Vinati Organics and Sterlite Technologies were the top outperformers while IndusInd Bank and Kansai Nerolac Paints remained laggards. Kansai Nerolac is the Indian subsidiary of Kansai Paints, Japan. The company is present across industrial and decorative coatings and has the third-largest distribution network in India.

Zum Padma India Fund