What the Market is talking………..
Everywhere in the world, the market is talking about the clout that India holds over other countries.
The latest country which has experienced and felt painfully this fact of life is the South Asian India’s neighbour Malaysia.
Malaysia is well known for its palm oil. Its economy is built on palm-oil. India is the top destination for Malaysia’s palm oil exports. India alone accounted for 28% of Malaysia’s palm-oil exports during January-September 2020 as against 16.5% in the same period in 2019.
As destiny would have it, the Malaysian PM Mahathir Mohamad recently criticised India’s actions in Kashmir. India has continuously maintained that Kashmir is its internal matter. As a result, India is considering to impose curbs on imports from Malaysia.
Trade analysts along with Hong Leong Investment Bank have opined that if India restricts imports of palm oil and other goods from the Southeast Asian nation, then it would not do any good to Malaysia.
While the economy and general well being of India can sustain without Malaysia’s palm oil, it will take a fair amount of time for Malaysian palm growers to find alternate markets to fill the vacuum, maintaining an underweight stance on the plantation sector.
India Inc has weathered the Covid-19 storm
While other countries struggle, India’s economy prospers only because of the enormous size of its consumer base which, in fact, reflects the size of India’s population.
Thus, every country is keen to develop economic and trade relations with India.
The resilience of India Inc. in challenging times like covid can be gauged by a few market indicators:
- Q1FY21 (April-June) Corporate India results were expected to be a washout because of nationwide lockdown due to Covid-19 in April. The gradual easing of restrictions started from May–June. At the index level, the topline fall was limited to 33% YoY excluding banks & NBFCs and a couple of commodity players that are yet to announce quarterly results.
- Considering profitability, at the index levers, the operating profit reduction was restricted to 29% YoY led by ~100 bps rise in EBITDA margins to 16.5%.
- Key sectors like IT actually grew YoY and arrested the topline decline.
- The bulk of people worked from home because there was work.
- This further increased reliance on connectivity. Data, voice, telecom sector actually outperformed with sales growing ~14% YoY.
- This enabled smooth corporate functioning and further endorsing the saying: “Data is the new Oil”.
Going forward, with the Nifty EPS is likely grow at a CAGR of 19.4% over FY20-22E, large macroeconomic data prints are signaling a path to normalcy.