E
CO
S
COPE
The Economy Observer
2 November 2020
Probability of upgrades rising
Expect real GDP to decline only ~5% in 2QFY21
Our in-house Economic Activity Index (EAI) for India’s GVA (called EAI-GVA) posted growth of 2.2% YoY for the first time
in seven months in Sep’20, following decline of 2.2% YoY in Aug’20. This implies EAI-GVA shrank just 1.7% YoY in
2QFY21 v/s -18% YoY in 1QFY21. Industrial activity contracted marginally (by 0.7% YoY), while the Services sector grew
3.1% YoY (for the first time in six months) in Sep’20. Growth in farm activity eased to 5.4% YoY in Sep’20, from the
double digits in the previous three months, due to decline in fertilizer production.
The EAI-GDP index (our in-house measure for official GDP), however, contracted 2.8% YoY in Sep’20, implying decline of
5% YoY in 2QFY21, following a 7.2% decrease a month ago. Notably, fiscal spending declined 37% YoY in Sep’20 (the
worst decline in 18 months), dragging down economic growth significantly during the month. Excluding fiscal spending,
EAI-GDP actually edged up 0.1% YoY during the month, marking growth for the first time in seven months. Following six
straight months of double-digit decline, investment spending shrank only 9% YoY in Sep’20, led by strong growth in
freight traffic and power generation.
Overall, as we had pointed out
earlier,
economic recovery over Aug–Sep’20 was much better than expected and would
likely peak in Oct’20. The base effect, pent-up demand, and hopes of a grand festive season have led to strong recovery,
which would certainly lead to sharp upgrades in FY21 GDP forecasts. Accordingly, we believe real GDP decline could be
only ~5% YoY in 2QFY21, better than
our forecast
of -7.1% and the Bloomberg consensus of -11%. Recovery, however,
remains highly unbalanced – rural
v/s
urban, consumption
v/s
investments, and Services
v/s
Industrial.
Preliminary estimates
reveal India’s EAI for GVA
posted growth of 2.2% YoY
in Sep’20, implying only
1.7% YoY decline in 2QFY21.
EAI-GVA grew 2.2% YoY in Sep’20:
Preliminary estimates reveal India’s EAI for
GVA posted growth of 2.2% YoY in Sep’20 – for the first time in seven months
following six consecutive declines – implying decline of only 1.7% YoY in 2QFY21
(Exhibit 1).
Although growth in farm activity weakened to 5.4% YoY in Sep’20
(from the double digits in the previous three months), the Services sector
posted growth for the first time in six months (supported by freight traffic and
the Financial sector); industrial activity contracted only marginally during the
month
(Exhibit 2).
EAI-GDP, however, declined during the month:
EAI-GDP fell 2.8% YoY in Sep’20,
marking a 5% YoY contraction in 2QFY21, following decline of 7.2% YoY in
Aug’20
(Exhibits 3, 4).
Fiscal spending was a major drag during the month,
excluding which EAI-GDP actually inched up 0.1% YoY in Sep’20.
Exhibit 2: …supported by strong revival in Services sector
(pp)
2.2
(2.2)
2.8
3.4
0.2
-0.8
-2.9
-5.0
Jun-20
Sep-20
Sep-19
Jul-20
Aug-20
Sep-20
0.9
-3.0
0.9
-2.5
-0.6
Agri
Industry
Services
EAI-GVA
2.2
1.9
0.5
-2.2
-0.2
Exhibit 1: India’s EAI-GVA grew 2.2% YoY in Sep’20…
2.8 1.3
EAI-GVA (% YoY)
5.7 5.8 4.7 6.6
(4.1)
(5.4) (5.0)
(18.5)
(30.3)
Sep-19
Dec-19
Mar-20
Please refer to our earlier
report
for details
Source: Various national sources, CEIC, MOFSL
Nikhil Gupta – Research Analyst
(Nikhil.Gupta@MotilalOswal.com)
Yaswi Agrawal
– Research Analyst
(Yaswi.Agrawal@motilaloswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on
www.motilaloswal.com/Institutional-Equities,
Bloomberg, Thomson Reuters, Factset and S&P Capital.
 Motilal Oswal Financial Services
Exhibit 3: EAI-GDP, however, fell 2.8% YoY in Sep’20…
EAI-GDP (% YoY)
23.9
6.0 3.6
3.0 4.6
2.1 4.3
(2.4) (4.7)
(17.0)
Sep-19
Dec-19
(25.8)
Mar-20
Jun-20
Sep-20
(2.8)
Exhibit 4: …led by sharp decline in fiscal consumption
10
5
0
(5)
(10)
Sep-19
Jul-20
Aug-20
Sep-20
Contribution of various components to EAI-GDP
Source: Various national sources, CEIC, MOFSL
Consumption
(pp)
1.3
4.7
3.3
(3.4)
(4.6)
2.0
(5.6)
(3.6)
3.9
(4.8)
(1.9)
Investment
Net exports
(7.2)
(3.0)
Please refer to our earlier
report
for details
Total consumption
spending declined 6.7% YoY
in Sep’20, primarily due to
the fastest contraction in 18
months at 37% YoY in fiscal
core revenue spending.
We believe real GDP decline
would contract only ~5%
YoY in 2QFY21, better than
our forecast of -7.1% and
the Bloomberg consensus
of -11%.
Fiscal spending declined sharply in Sep’20…:
According to our estimates, total
consumption spending (private and government) declined 6.7% YoY in Sep’20.
This was primarily attributable to the fastest contraction in 18 months at 37%
YoY in fiscal revenue spending (excluding interest payments). Private
consumption expenditure (PCE), however, declined only 3.7% YoY in Sep’20, the
slowest contraction in six months
(Exhibit 5).
Passenger traffic remained nil, but
petrol sales and consumer automobiles grew strongly in Sep’20
(refer to Exhibit
11 for the heat map).
…but private investments picked up:
Investments also continued to decline,
although at the slowest pace in seven months at 9% YoY in Sep’20, following six
straight months of double-digit decline
(Exhibit 6).
Although industrial
automobile sales, capital goods imports, and central government capex
continued to fall sharply, other indicators such as cargo traffic, power
generation, and cement production showed sharp improvement during the
month
(refer to Exhibit 12 for the heat map).
For India’s external sector, real
imports declined, while exports grew in Sep’20, owing to which foreign trade
added 3.9pp to EAI-GDP growth.
Services sector grew for the first time in six months:
Details of EAI-GVA suggest
that while Farm sector growth eased to 5.4% in Sep’20, from the double digits in
the previous three months, strong growth in freight traffic, automobile sales, and
the Financial sector led to growth for the first time in six months in Services
activity. On the other hand, Industrial activity fell only 0.7% YoY during the month
(Exhibits 7, 8).
While manufacturing and construction activities continued to fall
(albeit slower), mining and electricity and back in growth territory which helped
the Industrial sector
(refer to Exhibits 13, 14 for the heat map).
Expect real GDP to contract ~5% YoY in 2QFY21:
Overall, as we had pointed out
earlier,
economic recovery over Aug–Sep’20 was much better than expected
and would likely peak in Oct’20. The base effect, pent-up demand, and hopes of
a grand festive season have led to strong recovery, which would certainly lead
to sharp upgrades in FY21 GDP forecasts. Although there is no one-to-one
correlation between our EAIs and the official GDP/GVA due to
underlying
differences,
our composite indices move in sync with the official real GDP (ex-
discrepancies) and real GVA estimates
(Exhibits 9, 10).
Accordingly, we believe
real GDP decline may be only ~5% YoY in 2QFY21, better than
our forecast
of -
7.1% and the Bloomberg consensus of -11%. Recovery, however, remains highly
unbalanced – rural
v/s
urban, consumption
v/s
investments, and Services
v/s
Industrial.
2
2 November 2020
 Motilal Oswal Financial Services
Exhibit 5: Sharp decline in fiscal spending led to 6.7% decline
in total consumption in Sep’20…
MOLI: Consumption (% YoY)
54.1
Exhibit 6: …while investments posted single-digit decline for
the first time in seven months
MOLI: Investment (% YoY)
0.7
(4.4) (4.9)
(0.6)
(8.9)
(29.9)
(20.6)(17.9)
(25.5)
(39.0)
(10.7)(12.2)
6.2 6.8 6.0 5.8
2.5
6.2
Sep-19
Nov-19
Jan-20
Mar-20 May-20
(15.2)(14.7)
(3.5) (4.5)
(7.4) (6.7)
(62.8)
Jul-20
Sep-20
Sep-19
Nov-19
Jan-20
Mar-20 May-20
Jul-20
Sep-20
Exhibit 7: Industrial activity fell only marginally in Sep’20…
% YoY
20
10
0
(10)
(20)
(30)
(40)
(50)
(60)
(70)
Sep-19
Dec-19
Mar-20
Jun-20
3MMA
Industry#
(8.4) (0.7)
Exhibit 8: …and Services sector moved into positive territory
10
5
0
(5)
(10)
(15)
(20)
(25)
(1.0) 3.1
% YoY
3MMA
Services
Sep-20
Sep-19
Dec-19
Mar-20
Jun-20
Sep-20
# including construction
Exhibit 9: EAI-GVA moves in line with official real GVA…
20
10
0
(10)
(20)
(% YoY)
Official real GVA
Composite EAI-GVA
Exhibit 10: …and is also linked with official real GDP* growth
20
Composite EAI-GDP
Official real GDP*
(1.7)
10
0
(10)
(5.0)
(%, YoY)
Q2FY17
Q2FY18
Q2FY19
(30)
2QFY15 2QFY16 2QFY17 2QFY18 2QFY19 2QFY20 2QFY21
Source: CEIC, Various official sources, MOSL
-22.8
(20)
(30)
Q2FY16
-24.4
Q2FY20
Q2FY21
*Excluding discrepancies
2 November 2020
3
 Motilal Oswal Financial Services
Exhibit 11: Key leading indicators for consumption on monthly/quarterly basis
Passenger Revenue
traffic
1
spending
2
(1.3)
(2.2)
0.4
(1.2)
(1.6)
4.6
(38.1)
(101.1)
(100.6)
(99.2)
(97.7)
(96.4)
(93.9)
26.2
32.0
16.5
31.8
(9.7)
12.7
708.9
23.2
(32.1)
49.3
26.9
(19.6)
(37.0)
Petrol
sales
6.3
8.9
9.3
3.3
3.5
11.3
(16.4)
(60.4)
(35.3)
(13.5)
(10.4)
(7.5)
3.3
Rural
wages
3
(2.5)
(3.6)
(4.6)
(6.0)
(5.6)
(4.8)
(4.1)
(1.3)
1.1
2.4
2.0
6
2.3
6
2.6
6
Consumer
durable:
IIP
(10.5)
(18.9)
(1.4)
(5.6)
(3.7)
(6.2)
(36.8)
(95.7)
(70.3)
(34.3)
(23.0)
(10.3)
(7.0)
6
Foreign
tourists
arrival
4.4
6.2
7.9
2.9
0.6
(6.9)
(66.4)
(100.0)
(100.0)
(100.0)
(100.0)
(100.0)
(100.0)
Personal
credit
16.6
17.2
16.4
15.9
16.9
17.0
15.0
12.1
10.6
10.5
11.2
10.6
9.2
Services
PMI
48.7
49.2
52.7
53.3
55.5
54.5
49.3
5.4
12.6
33.7
34.2
41.8
49.8
% YoY
Sep-19
Oct-19
Nov-19
Dec-19
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
Jul-20
Aug-20
Sep-20
Currency
13.6
15.1
12.8
11.9
11.9
11.5
14.5
15.7
18.4
20.6
22.2
23.2
22.7
Auto sales
(22.6)
(12.6)
(12.4)
(14.2)
(14.6)
(18.1)
(41.7)
(100.0)
(84.0)
(39.8)
(14.0)
4.2
13.3
4
Imports
(4.9)
(5.4)
(4.2)
(5.2)
(3.6)
1.3
(28.5)
(47.5)
(31.9)
(36.4)
(17.0)
(24.4)
(4.3)
5
% YoY
2QFY19
3QFY19
4QFY19
1QFY20
2QFY20
3QFY20
4QFY20
1QFY21
2QFY21
1
Passenger Revenue
1
2
traffic
spending
3.5
2.9
1.1
(0.5)
(1.8)
(1.0)
(12.2)
(100.3)
(96.0)
25.1
0.5
(13.6)
8.7
25.1
27.7
36.4
9.7
(14.2)
Petrol
sales
6.6
7.8
9.4
10.1
8.1
7.1
(1.2)
(35.9)
(5.1)
Rural Consumer
3
wages durable: IIP
2.7
3.4
1.1
(1.1)
(1.9)
(4.7)
(4.9)
0.7
2.3
6
Currency
21.2
19.6
16.8
12.7
13.6
11.9
14.5
20.6
22.7
2
Auto sales
3.8
7.0
(8.0)
(13.0)
(22.0)
(13.0)
(24.3)
(74.9)
1.6
4
Imports
8.1
1.0
(1.1)
(1.2)
(2.3)
(5.0)
(11.0)
(38.3)
(15.4)
5
8.1
6.1
(0.1)
(2.7)
(7.6)
(9.1)
(15.8)
(67.4)
(13.7)
6
Foreign
tourists
arrival
4.2
2.0
2.1
4.0
2.5
5.5
(22.6)
(100.0)
(100.0)
Personal
credit
15.1
17.0
16.4
16.6
16.6
15.9
15.0
10.5
9.2
Services
PMI
52.2
53.0
52.2
50.3
51.6
51.7
53.1
17.2
41.9
Railways and aviation
Revenue spending less interest payments of central government
3
4
Real rural wages, deflated by CPI for rural workers
Includes passenger vehicles and two-wheelers
5
Import of agricultural items, leather products, newsprint and electronic goods, textiles (excluding gold, silver, precious metals)
6
Our forecasts
Worse than previous month and a year ago
Worse than the previous month but better than a year ago
Better than the previous month but worse than a year ago
Better than previous month and a year ago
2 November 2020
4
 Motilal Oswal Financial Services
Exhibit 12: Key leading indicators for investment on monthly/quarterly basis
% YoY
Sep-19
Oct-19
Nov-19
Dec-19
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
Jul-20
Aug-20
Sep-20
Cargo
traffic
1
(4.4)
(7.0)
0.4
4.9
2.8
5.7
(10.8)
(30.0)
(22.0)
(10.2)
(7.8)
(1.6)
8.9
Electricity
(2.6)
(12.2)
(4.9)
(0.0)
3.2
11.5
(8.2)
(22.9)
(14.8)
(10.0)
(2.5)
(1.8)
3.7
Auto
sales
2,*
(24.3)
(14.6)
(6.8)
0.2
(3.8)
(32.1)
(76.8)
(100.0)
(86.4)
(67.4)
(55.9)
(45.7)
(34.1)
Diesel
sales
(3.1)
(7.3)
9.1
(0.0)
(1.8)
6.2
(24.2)
(55.6)
(29.5)
(15.5)
(19.5)
(20.7)
(6.0)
Capital
IIP: Non-
IIP:
goods’
Cement metallic Capital Industrial
imports
3
Production products goods
credit
(9.4)
(2.0)
(2.3)
(20.5)
2.7
(6.1)
(21.8)
(16.5)
6.6
14.1
(16.5)
(54.2)
(33.6)
(42.1)
(37.7)
(42.0)
(29.2)
(7.7)
4.3
5.5
5.1
7.8
(25.1)
(85.2)
(21.4)
(6.8)
(13.5)
(14.5)
(3.5)
(9.2)
1.4
2.1
4.2
9.5
(23.7)
(86.6)
(27.3)
(8.7)
(13.5)
(11.7)
(9.1)
5
(22.4)
(8.9)
(18.3)
(4.4)
(9.6)
(38.8)
(92.7)
(65.9)
(37.4)
(22.8)
(15.4)
(7.9)
5
3.4
2.4
1.6
2.5
0.7
0.7
1.7
1.7
2.2
0.8
0.5
(0.0)
Govt
capex
4
68.9
(5.1)
(12.3)
104.4
(31.8)
(15.7)
(4.4)
(7.5)
57.2
116.2
(47.1)
(20.9)
(38.9)
Manufacturing
PMI
51.4
50.6
51.2
52.7
55.3
54.5
51.8
27.4
30.8
47.2
46.0
52.0
56.8
% YoY
2QFY19
3QFY19
4QFY19
1QFY20
2QFY20
3QFY20
4QFY20
1QFY21
2QFY21
1
Cargo
1
traffic
5.1
4.2
3.0
2.3
(1.8)
(0.6)
(1.3)
(20.8)
(0.5)
Electricity
7.5
6.9
1.4
7.3
0.6
(5.9)
1.7
(15.8)
(0.3)
Auto
2,*
sales
26.3
0.7
(3.2)
(8.6)
(22.6)
(7.7)
(40.4)
(84.2) *
(44.8) *
Diesel
sales
2.8
2.0
3.5
2.2
(0.1)
0.5
(7.1)
(33.3)
(15.7)
Capital
IIP: Non-
IIP:
goods’
Cement metallic Capital Industrial
3
imports Production products goods
credit
28.3
12.5
8.8
6.6
1.5
16.0
0.1
(6.1)
(11.8)
(15.0)
0.8
(43.0)
(36.4)
12.9
11.7
1.0
0.2
0.6
(5.0)
(38.3)
(10.6)
2
Govt
4
capex
(3.1)
(45.5)
268.1
(27.6)
64.6
38.2
(14.7)
40.1
(37.7)
Manufacturing
PMI
52.1
53.4
53.6
52.2
51.8
51.5
53.9
35.1
51.6
8.1
5.2
(1.2)
(0.0)
(2.0)
(4.2)
(41.2)
(11.5)
5
5.4
(7.5)
(3.6)
(16.6)
(16.9)
(18.3)
(64.8)
(15.4)
5
4.0
5.9
6.6
4.2
2.4
1.3
1.9
0.4
Railways and waterways
Includes commercial vehicles and three-wheelers
3
4
Machinery and equipment, transport equipment, machine tools and project goods
Capital spending of the
central government
5
Our forecasts
* - Data for total CV sales from Apr’20 derived using CV sales of Ashok Leyland, Eicher Motors ltd., and Mahindra & Mahindra Ltd.; the
three account for ~50% of all CV sales
Worse than previous month and a year ago
Worse than the previous month but better than a year ago
Better than the previous month but worse than a year ago
Better than previous month and a year ago
2 November 2020
5
 Motilal Oswal Financial Services
Exhibit 13: Key indicators used in the creation of EAI-GVA on a monthly basis
% YoY
Sep-19
Agriculture and allied activities
IIP: Fertiliser
5.4
Domestic tractor sales
(6.4)
1
Real rural wages
(2.5)
Reservoir levels
19.3
Agriculture sector
2.8
Industrial sector
Coal
(20.5)
Crude oil
(5.4)
Natural gas
(4.9)
IIP: Mining
(8.6)
Mining
(6.4)
Electricity
(2.6)
IIP: Manufacturing
(4.3)
2
Credit growth
2.4
Fuel consumption
(2.9)
Manufacturing
(1.0)
Steel production
(1.4)
Cement output
(2.0)
3
IIP: NMMP
(2.3)
IIP: Construction
(7.0)
Construction
(7.0)
Industry
(2.9)
Services sector
Auto sales
#
(22.7)
4
Trade credit
5.2
Foreign tourist arrivals
4.4
5
Freight traffic
(4.4)
5
Passengers traffic
(1.3)
MFs AUMs
10.8
6
Fiscal Spending
32.4
7
Real deposits
9.0
Telecom subscribers
0.3
PMI: Services
(4.3)
Services sector
5.0
Aggregates
EAI-GVA
2.8
Non-farm EAI-GVA
2.8
1
Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20
11.8
(5.5)
(3.6)
36.0
4.0
(17.6)
(5.1)
(5.6)
(8.0)
(5.6)
(12.2)
(5.7)
3.4
(8.8)
(4.8)
(0.5)
(7.7)
(9.2)
(9.7)
(9.7)
(6.6)
(12.8)
5.2
6.2
(7.0)
(2.3)
18.4
27.4
10.2
1.1
(5.7)
4.5
1.3
0.9
13.6
(12.8)
(4.6)
49.4
3.9
(3.5)
(6.0)
(6.4)
1.9
0.2
(4.9)
3.0
1.8
7.8
9.3
7.0
4.3
1.4
(0.7)
(0.7)
5.0
(12.1)
4.0
7.9
0.4
0.2
11.9
11.7
8.9
(1.5)
(1.9)
6.2
5.7
6.0
10.2
4.0
(6.0)
58.7
6.0
6.1
(7.4)
(9.2)
5.7
1.7
(0.0)
(0.3)
(1.1)
(0.0)
2.8
8.7
5.5
2.1
0.2
0.2
1.9
(13.1)
2.9
2.9
4.9
(1.3)
13.0
38.2
6.7
(2.1)
0.2
7.5
5.8
5.7
(0.1)
3.3
(5.6)
65.6
5.8
8.0
(5.3)
(9.0)
4.4
3.1
3.2
1.8
(1.0)
1.8
5.2
1.6
5.1
4.2
(0.3)
(0.3)
3.5
2.9
19.6
(4.8)
55.5
7.2
11.3
(6.4)
(9.6)
9.6
5.0
11.5
3.8
(1.6)
5.3
8.3
2.9
7.8
9.5
2.8
2.8
6.8
(11.9)
(50.2)
(4.1)
75.2
(0.1)
4.0
(5.5)
(15.1)
(1.3)
(1.7)
(8.2)
(22.8)
0.3
(19.1)
(22.3)
(21.9)
(25.1)
(23.7)
(24.3)
(24.3)
(19.8)
(4.5)
(80.1)
(1.3)
65.9
(3.4)
(15.5)
(6.4)
(19.9)
(26.9)
(18.0)
(22.9)
(66.6)
3.4
(49.6)
(67.9)
(82.8)
(85.2)
(86.6)
(85.0)
(85.0)
(63.9)
7.5
0.5
1.1
83.1
7.1
(14.0)
(7.1)
(16.8)
(20.4)
(14.7)
(14.8)
(37.8)
5.2
(24.1)
(34.9)
(40.4)
(21.4)
(27.3)
(39.0)
(39.0)
(32.4)
4.2
20.2
2.4
115.7
10.8
(15.5)
(6.0)
(12.0)
(19.6)
(12.6)
(10.0)
(16.0)
4.1
(9.8)
(12.5)
(23.2)
(6.8)
(8.7)
(18.8)
(18.8)
(13.8)
6.9
35.9
2.0
8
71.5
10.4
(5.7)
(4.9)
(10.2)
(12.8)
(6.7)
(2.5)
(11.6)
1.1
(16.7)
(13.0)
(8.3)
(13.5)
(13.5)
(8.6)
(8.6)
(10.6)
7.3
64.8
2.3
8
3.6
10.1
3.6
(6.3)
(9.5)
(9.8)
(4.8)
(1.8)
(8.6)
0.3
(18.7)
(11.9)
(1.7)
(14.5)
(11.7)
(2.3)
(2.3)
(8.4)
1.2
12.3
(100.0)
(1.6)
(96.8)
7.7
(20.0)
10.7
(1.8)
8
(20.2)
(1.0)
(2.2)
(3.0)
(0.3)
26.7
2.6
8
1.4
5.4
21.2
(6.0)
(10.6)
(0.5)
8
2.1
3.7
(4.0)
8
(1.3)
(4.0)
(1.7)
0.9
(3.5)
(9.1)
8
(1.6)
8
(1.6)
8
(0.7)
10.4
10.0
(100.0)
8.9
(94.3)
8.2
(38.2)
9.1
(1.3)
8
(1.0)
3.1
2.2
2.2
(13.8) (19.1)
1.2
4.4
0.6
(6.9)
2.8
5.7
(1.7)
4.5
15.1
15.0
(15.8)
2.1
7.3
7.8
(2.2) (2.0)
6.3
9.5
5.2
6.3
4.7
4.7
6.6
6.6
(45.0) (100.0) (84.1) (41.5) (16.6)
4.2
9.2
9.8
8.1
9.4
(66.4) (100.0)
(100.0) (100.0) (100.0)
(10.8) (30.0) (22.0) (10.2) (7.8)
(38.1) (101.2) (100.6) (99.4) (98.0)
(6.8)
(1.9)
(2.0)
7.0
10.8
173.4
21.1
(21.9)
59.4
9.2
7.4
11.7
14.4
11.7
12.4
(0.5)
(1.2)
(1.6)
(2.2)
(2.1)
(5.2) (89.4) (74.9) (32.1) (36.4)
3.6
(19.6) (16.2)
(4.0)
(4.5)
(4.1)
(4.6)
2
(30.3)
(33.2)
(18.5)
(21.2)
(5.4)
(7.1)
(5.0)
(6.1)
Rural wages; deflated by CPI for rural workers
Banks’ industrial credit growth; deflated by WPI
3
4
Non-metallic minerals products (NMMP)
Bank’s non-food trade credit; deflated by WPI
5
6
Railways and aviation
Total non-interest spending by the central government; deflated by WPI
7
Bank deposits; deflated by WPI
8
Our forecasts
# Sale of commercial vehicles within total auto Sales from Apr’20 has been derived using CV sales of Ashok Leyland, Eicher Motors ltd.,
and Mahindra & Mahindra Ltd.; the three account for ~50% of all CV sales
Source: Various National Sources, CEIC, MOFSL
Worse than previous month and a year ago
Worse than the previous month but better than a year ago
Better than the previous month but worse than a year ago
Better than previous month and a year ago
2 November 2020
6
 Motilal Oswal Financial Services
Exhibit 14: Key indicators used in the creation of EAI-GVA on a quarterly basis
% YoY
1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 1QFY20 2QFY20 3QFY20 4QFY20 1QFY21
Agriculture and allied activities
IIP: Fertiliser
4.5
(0.6)
(7.4)
5.8
(1.1)
3.3
(1.1)
3.3
11.8
(3.1)
2.8
Domestic tractor sales
25.9
1.4
19.5
(5.8)
(15.6) (10.7) (15.6) (10.7)
(5.7)
(12.6) (15.8)
1
Real rural wages
2.5
2.7
3.4
1.1
(1.1)
(1.9)
(1.1)
(1.9)
(4.7)
(4.9)
0.7
Reservoir levels
(12.0)
19.9
0.4
4.5
6.2
4.2
6.2
4.2
47.0
64.7
84.3
Agriculture sector
4.9
3.6
4.3
2.3
0.8
1.4
0.8
1.4
4.5
3.9
5.1
Industrial sector
Coal
12.9
6.2
5.1
6.4
2.6
(10.3)
2.6
(10.3)
(4.7)
7.4
(15.0)
Crude oil
(2.4)
(4.4)
(4.3)
(5.5)
(6.8)
(5.1)
(6.8)
(5.1)
(6.2)
(5.7)
(6.5)
Natural gas
0.4
(2.0)
1.3
3.8
(1.0)
(3.1)
(1.0)
(3.1)
(7.1)
(11.3) (16.2)
IIP: Mining
5.4
0.9
2.8
2.2
3.0
(1.2)
3.0
(1.2)
(0.0)
3.9
(22.3)
Mining
8.8
3.6
5.1
4.7
2.3
(0.8)
2.3
(0.8)
(1.1)
1.9
(15.1)
Electricity
4.8
7.5
6.9
1.4
7.3
0.6
7.3
0.6
(5.9)
1.7
(15.8)
IIP: Manufacturing
5.1
5.6
3.4
1.4
2.4
(0.4)
2.4
(0.4)
(1.1)
(6.3)
(39.9)
2
Credit growth
(3.4)
(3.3)
(0.4)
2.9
3.8
3.3
3.8
3.3
1.3
(0.8)
4.2
Fuel consumption
4.0
4.9
2.7
3.4
(0.6)
1.4
(0.6)
1.4
(0.4)
(4.4)
(27.7)
Manufacturing
8.4
9.2
6.8
6.1
5.0
3.9
5.0
3.9
2.3
(3.5)
(38.2)
Steel production
2.3
4.7
5.9
7.4
12.4
3.5
12.4
3.5
5.1
(6.5)
(48.6)
Cement output
16.3
12.5
12.9
11.7
1.0
0.2
1.0
0.2
0.6
(5.0)
(38.3)
3
IIP: NMMP
12.2
8.8
8.1
5.2
(1.2)
(0.0)
(1.2)
(0.0)
(2.0)
(4.2)
(41.2)
Construction
8.5
8.9
7.6
4.5
0.4
(3.3)
0.4
(3.3)
(3.4)
(7.3)
(35.5)
Industry
8.5
8.7
7.0
5.2
3.8
1.5
3.8
1.5
(0.1)
(3.2)
(36.5)
Services sector
Auto sales
#
18.0
4.9
6.6
(7.6)
(12.8) (22.0) (12.8) (22.0) (12.6) (25.6) (75.4)
4
Trade credit
9.6
8.1
6.4
8.9
5.9
6.6
5.9
6.6
4.0
3.3
9.0
Foreign tourist arrivals
1.6
4.2
2.0
2.1
4.0
2.5
4.0
2.5
5.5
(22.6) (100.0)
5
Freight traffic
5.5
5.1
4.2
3.0
2.3
(1.8)
2.3
(1.8)
(0.6)
(1.3)
(20.8)
5
Passengers traffic
(0.1)
3.3
2.7
1.0
(0.5)
(1.9)
(0.5)
(1.9)
(1.1)
(12.2) (100.4)
MFs AUMs
14.6
9.8
1.1
3.6
6.3
5.0
6.3
5.0
14.3
7.7
0.9
6
Real CG spending
4.0
13.9
(13.6)
8.6
0.3
30.2
0.3
30.2
27.5
18.7
15.4
7
Real deposits
2.7
3.7
4.9
6.8
7.5
8.6
7.5
8.6
8.6
7.5
12.6
Telecom subscribers
(4.0)
(1.9)
0.1
0.9
2.4
0.5
2.4
0.5
(0.8)
(1.6)
(1.7)
PMI: Services
(1.2)
8.7
5.3
4.6
(1.8)
(1.1)
(1.8)
(1.1)
(2.5)
3.6
(65.7)
Services sector
7.6
8.8
7.8
8.0
6.4
6.3
6.4
6.3
6.1
3.8
(13.5)
Aggregates
Real GVA
7.7
8.6
7.2
6.5
5.2
4.7
5.2
4.7
4.2
2.4
(18.1)
Non-farm GVA
7.9
8.9
7.6
6.9
5.6
5.0
5.6
5.0
4.1
2.3
(20.5)
1
2
2QFY21
4.6
38.2
2.3
8
11.4
7.4
5.5
(5.7)
(10.1)
(8.0)
8
(3.4)
(0.3)
(8.1)
8
0.0
(13.5)
(9.1)
(3.1)
(10.6)
(11.5)
8
(49.4)
8
(6.7)
(1.3)
10.6
(100.0)
(0.5)
(96.4)
8.9
(19.1)
10.7
(1.7)
8
(19.8)
(1.0)
(1.7)
(2.3)
Rural wages; deflated by CPI for rural workers
Banks’ industrial credit growth; deflated by WPI
3
4
Non-metallic minerals products (NMMP)
Bank’s non-food trade credit; deflated by WPI
5
6
Railways and aviation
Total non-interest spending by the central government; deflated by WPI
7
Bank deposits; deflated by WPI
8
Our forecasts
# Sale of commercial vehicles within total auto Sales from Apr’20 has been derived using CV sales of Ashok Leyland,
Eicher Motors ltd., and Mahindra & Mahindra Ltd.; the three account for ~50% of all CV sales Source: Various National Sources, CEIC, MoSL
Worse than previous month and a year ago
Worse than the previous month but better than a year ago
Better than the previous month but worse than a year ago
Better than previous month and a year ago
2 November 2020
7
 Motilal Oswal Financial Services
NOTES
2 November 2020
8
 Motilal Oswal Financial Services
Explanation of Investment Rating
Investment Rating
BUY
SELL
NEUTRAL
UNDER REVIEW
NOT RATED
*In
case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within following 30
days take appropriate measures to make the recommendation consistent with the investment rating legend.
Disclosures:
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the Regulations,
is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial products. MOFSL is a subsidiary
company of Passionate Investment Management Pvt. Ltd.. (PIMPL). MOFSL is a listed public company, the details in respect of which are available on
www.motilaloswal.com.
MOFSL
(erstwhile Motilal Oswal Securities Limited - MOFSL) is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading Member with National Stock Exchange of
India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and National Commodity & Derivatives Exchange Limited (NCDEX) for its
stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) National Securities Depository Limited (NSDL),NERL, COMRIS and CCRL and is member
of Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance Regulatory & Development Authority of India (IRDA) as Corporate Agent for insurance
products. Details of associate entities of Motilal Oswal Financial Services Limited are available on the website at
http://onlinereports.motilaloswal.com/Dormant/documents/Associate%20Details.pdf
Details of pending Enquiry Proceedings of Motilal Oswal Financial Services Limited are available on the website at
https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx
MOFSL, it’s associates, Research Analyst or their relative may have any financial interest in the subject company. MOFSL and/or its associates and/or Research Analyst may have
actual/beneficial ownership of 1% or more securities in the subject company in the past 12 months.
MOFSL and its associate company(ies), their directors and Research Analyst and their
relatives may; (a) from time to time, have a long or short position in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in
any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as
an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions.;
however the same shall have no bearing whatsoever on the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of
the views of the associates of MOFSL even though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.
Research Analyst may have served
as director/officer, etc. in the subject company in the past 12 months. MOFSL and/or its associates may have received any compensation from the subject company in the past 12 months.
In the past 12 months , MOFSL or any of its associates may have:
1.
managed or co-managed public offering of securities from subject company of this research report,
2.
received compensation for investment banking or merchant banking or brokerage services from subject company of this research report,
3.
received compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company of this research report.
4.
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MOFSL and it’s associates have not received any compensation or other benefits from the subject company or third party in connection with the research report. To enhance transparency,
MOFSL has incorporated a Disclosure of Interest Statement in this document. This should, however, not be treated as endorsement of the views expressed in the report. MOFSL and / or its
affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report should be aware that MOFSL may
have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific merchant banking, investment banking or
brokerage service transactions. Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial
holdings, It does not consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income
from clients which are not considered in above disclosures. Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only.
While calculating beneficial holdings, It does not consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.).
MOFSL also earns DP income from clients which are not considered in above disclosures.
Terms & Conditions:
This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and may not be
altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of MOFSL. The report is
based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in nature. The information is obtained from
publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made
as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The report is prepared solely for informational purpose and does not
constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments for the clients. Though disseminated to all the customers
simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as customers by virtue of their receiving this report.
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research
analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
Disclosure of Interest Statement
Companies where there is interest
Analyst ownership of the stock
No
A graph of daily closing prices of securities is available at
www.nseindia.com, www.bseindia.com.
Research Analyst views on Subject Company may vary based on Fundamental research and
Technical Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated from MOFSL research activity
and therefore it can have an independent view with regards to subject company for which Research Team have expressed their views.
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This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use
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Hong Kong.
Expected return (over 12-month)
>=15%
< - 10%
> - 10 % to 15%
Rating may undergo a change
We have forward looking estimates for the stock but we refrain from assigning recommendation
2 November 2020
9
 Motilal Oswal Financial Services
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and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report constitutes
investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions
expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific
recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this document should make such investigations as it deems
necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult its
own advisors to determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors. Certain transactions -including those
involving futures, options, another derivative products as well as non-investment grade securities - involve substantial risk and are not suitable for all investors. No representation or warranty,
express or implied, is made as to the accuracy, completeness or fairness of the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this
document is provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior
notice. The Company reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their
directors and the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They
may perform or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities
functions as a separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of
information that is already available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or may not
subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to
any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of
or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject MOFSL to any
registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in
whose possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm, not its directors, employees, agents or representatives shall
be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information.
The person accessing this information specifically agrees to exempt MOFSL or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not
to hold MOFSL or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOFSL or any of its affiliates or employees free and harmless from all losses,
costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263; Website
www.motilaloswal.com.
CIN No.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad(West), Mumbai- 400 064. Tel No: 022
7188 1000.
Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst: INH000000412. AMFI:
ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579 ;PMS:INP000006712. Motilal Oswal Asset Management Company Ltd. (MOAMC): PMS (Registration
No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.:
INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond,
NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. which is a group company of MOFSL. Private Equity is offered
through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL. Research & Advisory services is backed by proper research. Please read the Risk
Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no assurance or guarantee of the returns. Investment in securities market is subject to market risk,
read all the related documents carefully before investing. Details of Compliance Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.
* MOFSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National Company
Law Tribunal, Mumbai Bench.
2 November 2020
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