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India's consumption surge, driven by easy credit, is faltering as household savings hit a six-year low, with net financial savings at just 5.3% of GDP. Analysts warn that unless the job market improves and borrowing costs decrease, consumer spending will remain weak amid rising household liabilities.
Saurabh Mukherjea, founder and CIO of Marcellus Investment Managers, addressed foreign investors' concerns about the right time to invest in India, describing it as a classic "dharamsankat." He noted that while the current earnings multiple is elevated at 23x, a slowdown in earnings growth is expected, indicating a cyclical downturn. Despite this, private sector capital expenditure is improving, and bank balance sheets remain strong, suggesting that foreign investors will eventually find opportunities in the market.
In Samvat 2080, local investors demonstrated remarkable resilience, navigating challenges like the Iran-Israel conflict and high valuations, with the Nifty's P/E at 23.5. Despite slowing domestic earnings growth, sectors like PSU and power thrived, while media and oil & gas struggled. As global inflation eases, India's economic outlook for 2024 remains positive, bolstered by local investor confidence and mutual fund flows.
Saurabh Mukherjea of Marcellus Investment Managers highlights a slowdown in India's premium consumption segment, previously thought to be insulated in the K-shaped recovery. This shift is attributed to weak formal job creation, particularly in IT services, leading to declining passenger vehicle sales and softer consumer demand. Anticipating a political shift towards rural support, Marcellus has adjusted its portfolio, adding Godrej Agrovet and Tata Consumer Products, recognizing Godrej Agrovet as a strong rural recovery play.
Saurabh Mukherjea, founder and chief investment officer at Marcellus Investment Managers, predicts that India's earnings growth may stagnate in the September quarter, following a slowdown observed in the June quarter. He attributes this trend to various factors, including the high-base effect, indicating a multi-quarter earnings slowdown ahead.
Saurabh Mukherjea of Marcellus Investment Managers attributes Zomato's success to the funding winter that limited competition, creating a duopoly in the food delivery market alongside Swiggy. He emphasizes that strategic business decisions during this period have been crucial for Zomato's growth.
Saurabh Mukherjea from Marcellus Investment Managers highlights a dual trend in India's economy: while direct tax collections are robust, growing at 16-17% in FY2024 and maintaining mid-teens growth in FY2025, a resurgence of black money poses a significant counteracting force. Despite progress in formalizing unorganized sectors, the presence of black money remains a troubling issue, suggesting that these developments may be neutralizing each other.
Saurabh Mukherjea of Marcellus Investment Managers is focusing on rural consumption as a key investment strategy, anticipating government support for rural India. His firm has invested significantly in Godrej Agrovet, capitalizing on its potential for recovery, and in Tata Consumer Products, based on strong FMCG revenue growth prospects.
Saurabh Mukherjea, founder of Marcellus Investment Managers, highlights key risks for Indian equity markets, including domestic fiscal challenges and global instability. He warns that slowing GST collections may require tighter fiscal measures, impacting capital expenditures crucial for market growth. Additionally, he notes unprecedented volatility due to geopolitical tensions.
Market experts Samir Arora and Saurabh Mukherjea criticized the hike in long-term capital gains tax, arguing it could deter foreign institutional investors and impede the democratization of domestic markets. Arora emphasized India's reliance on foreign capital for private equity and highlighted that post-tax returns in India do not match the pre-tax allure, suggesting that the capital gains tax is a significant factor in the country's lagging market performance.
Saurabh Mukherjea
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