Asian investors continue to be worried about the new strain of the corona virus that has led to fears of a pandemic in China and across most of Asia. Apart from the likely impact on private consumption, the markets are also jittery about the possible impact of the virus on tourism and the flow of portfolio flows in China. China being the largest exporter and importer in the region is likely to have a spill over impact on other markets. However, after the initial sharp correction on Tuesday, most Asian markets managed to recover towards close. The last time SARS had hit China in 2002, the damage to sentiments was huge.
Auto sales numbers once again dipped in the month of December after two consecutive months of positive growth. For the month of December, the total vehicle registrations dropped by 15% to just about 16.06 lakhs. Between January 2019 and September 2019, the auto sales had been consistently on a downtrend. However, this trend appeared to have been arrested in October and November. However, with the festive sales of October and November waning and the base effect also coming into play, December was a return to the low sales cycle. Autos have been representative of weak consumption.
As the Halwa ceremony heralded the beginning of Budget printing, the big challenge for the government will be to fill up the resource gap. The actual tax collections for the financial year 2018-19 were short of target by Rs.191,000 crore. This problem could become more acute in the fiscal year 2019-20 with the tax collections falling short of targets by a much bigger margin. In the years prior to 2018-19, the tax shortfall used to be very small. In the last two years, the government has set ambitious targets for tax collection but the business outlook has failed to keep pace with such ambitious revenue goals.
One of India’s top retail audit firm, A C Nielsen, expects the FMCG demand to pick up in the coming months. According to estimates put out by Nielsen, the Rs.4 trillion FMCG market in India could see a 10% growth in revenues in the calendar year 2020. FMCG sales have been falling for the last five quarters in succession. The FMCG sector growth has been in negative territory since September 2018, when the NBFC sector pressures first emerged in India. FMCG demand has been under pressure since then. The recovery is likely to be driven by macroeconomic and channel level factors.
The Department of Telecom (DOT) continues to play hard ball with the telecom companies on the subject of telecom AGR dues. The official deadline as per the Supreme Court order is 23rd January but most telecom companies are not in a position to pay the amount by the stipulated date. Bharti and Vodafone Idea have already filed the modification petition in the Supreme Court for relaxation in the payment deadline and a final judgement on the subject is expected by Wednesday. While a positive judgement by the SC will allow the telcos to engage with the DOT to discuss postponement of the deadline, the DOT is expected to go ahead and issue notices to these companies on January 24th. The chairman of COAI has expressed hope that the issue should be sorted out amicably now.
HDFC AMC reported a 27% increase in profits for the December quarter even as HDFC AMC cornered 14.4% of the mutual funds market. HDFC AMC has a more favorable mix of equity and debt which results in higher fees too. Meanwhile, mutual funds overall added 6.8 million folios during the year 2019 taking the total number of folios to 87 million overall. Of course, folios are accounts and are not a proxy for number of investors but can be seen as broadly representative of retail interest. HDFC AMC, the largest player, has been commanding rich valuations in the stock markets since listing.
