The Signal: The Week Highlights

1. India’s Domestic Discourse Attract Cautious Global Gauge

The sharpest economic contraction on record and across the world has investors worried about India’s promise as an investment-favorite destination. Economic agencies across borders slash GDP estimates to reflect current economic climate more correctly, and bank on more govt.-induced policies/reforms to clot bleeding economy.

Covid 19, now in 2020, and in 2021 in 3 months, continues to be bearer of bad news. Causing shockwaves across the world, India’s GDP correction reflects economic infections. Like before, reforms are being merited as economical vaccine, with individuals and institutions awaiting govt.’s possible Relief package 2.0 announcement between October-November 2020.

2. Kamath Report Reshapes Banking For The 2020-Gen Economy

The guidelines to restructure loan offer a bitter-sweet solution, with banks made to adhere to 5 key financial metrics and timelines by which to achieve them. Exceptions for 5 sectors, and NPA recognition norms can prove to be beneficial in cleaning country’s banking books. Betting big on 2-year timeline, banks and shadow banks to see 2017 repeat telecast.

All, but one voice, cheered when the moratorium was announced, and that was the banks. Knowing of the impending doom in economic contractions, and bending will to satiate govt. policies, those who lend money are themselves in dire need of it. 3 years later, banks find themselves 4 years behind! The post-Covid loan assessment norms can guide banks to cleaner books, in a, “as much leeway – as is locked” situation

3. Covid Strikes 2 Bird With 1 Stone – Economy & Politics Of Economics

GST shortfall has snowballed into breaking through deficit fences of states, as revenue-compromised Centre cannot diffuse pre-promised payments. More so, unpaid dues by govt. to multiple economic players may climb to ~Rs 9.5 lakh or Cr. (4.2% of FY21 GDP), thereby violating fiscal discipline by breaching deficit targets across all political factions.

The economic illness caused due to viral virus has affected the whole of growth drivers – from root to shoot. As country cheers for a V-shape recovery in the medium term, it will have to 1st toil its way through near-term stress. As GST collections stand as true reflections of the same, the rate of adopting to the new normal will be key in boosting GST to pre-covid levels. Opening 4.0 can welcome better times, as proof lies in correction from April’s abysmal GST collection, which nosedived 72% to record low levels. 

4. Covid Cuts A Slice Of The Mutual Fund Pie

Indian equity mutual funds faced 2nd monthly withdrawal in 4 years as at Rs 4,028 cr. as investors continued to cash out to tide over the pandemic-related credit crunch. The Mutual Fund industry, in line with economy, shrank by (Rs.14,500 Cr.) vs blockbuster inflows of 89,813 cr. last month.

“Be Greedy when others are fearful” is a half-quote with a full impact. The $1.9 Tn market of a $5 Tn to-be economy has a mix of doubters (domestic equity selling) and believers (Net FII buying – 4 months now!). As the economy recovered 50% from March lows, basic math tells us there is still a 50% gap (read as: offering), for those willing to risk it. The choice is yours; the time is not. Thick Quick – Act Quicker 

5. Foreign Players New Favorite Hindi Word – Reliance

Reliance Industries crossed the USD 200 Bn value earlier this week on euphoria of absorbing yesterday’s future retail for tomorrow’s Reliance Retail. Early believers in Jio continue to show faith as they pour in USD 2 Bn+ in reliance retail venture. Now Catching Amazon’s attention, India’s biggest company (2x the size of 2nd biggest company – TCS) has truly become a household name. With Gas, Food and Phone, it can by itself carry India into post-covid era.

The FII fervor Jio started over the last 3 months, is now being amplified by its sister company in Reliance retail. Onboarding domestic infrastructure and foreign money is the best strategy in any Indian business playbook. The Veteran in Reliance carries its legacy from yesterdays legend to tomorrows leader.