Very interesting insights shared by @NileshShah68 via the Monthly Update. Thank you so much. Sharing some nuggets out of the overall insights are in this thread.
Extreme polarisation visible in S&P500 where other than the FAANG stocks which are +35%, other 495 are -5%
Extreme polarisation visible in S&P500 where other than the FAANG stocks which are +35%, other 495 are -5%
Same is in India. Top 15 stocks in NIFTY are at a level of NIFTY 14950 and rest are at the levels of ~8400 levels. Extreme polarision led by Reliance
Grim scenario with increasing US bankcrupcies and dropping confidence Indices.
Post the lockdown, the Business resumption index from Nomural went up from 45 levels to 70 in June. However, post that, it has been stagnant at these levels, yet far from 100 post lockdown levels.
Return on Capital Employed has declined steadily since 2010. In 2010, 90% of the Companies earned ROCE higher than the rate of loan. Now this is 30% of the Companies.
Depending upon the type of business, the recovery will be smooth to painful. For example, the Discretionary Consumer spending, e.g. Travel & tourism, it will have a significant decline and the longest recover. However, for Essential items, the impact would be minimal (green line)
Recovery is being led from Rural 'Bharat' rather than wider Urban locations. This is witnessed via Tractors and Fertilisers growth
Monsoon is of great support with current rainfall nicely spread across the country and at long term average. This aids sowing activity.
Gradual recovery is also being witnessed in Urban cities via data points such as Power consumptions, car registrations, GST eWay Bill generations indicating movement of goods
Some more high frequency data points which shows positive signs
GST Collections have yet to come up to normal levels which is understandable owing to economy which is yet to fully recover.
A question which comes to mind, are the Govt doing the right things. The data shows, that atleast in India it looks that we are progressing well - though opposite to what people thing for US.
From the market performance till date, the drivers of this rally have been Healthcare & Technology. Banking is the laggard.
The current market correction has changed the return dynamics significantly. Right side shows returns as of Jan 2020 vs left as of July 2020 for short and long term returns.
The valuations are now moderated now and one must not be overweight now.
