Facing the disruption:
The correction has finally come. The market remained too buoyant for too long. Today's correction should be treated as healthy, the one that keeps the market in check.With fundamental indicators improving, investors have a much bigger picture to focus on. With the market expected to turn volatile, the following few days should provide good opportunities to buy quality stocks on dips.
Real estate: Covid-19 added insult to injury
Rural India is throwing a few signs of life but the urban market continues to remain subdued. The real estate sector is the primary casualty of this trend.For a sector that was already struggling with a huge pile of inventory and indifferent buyers; Covid 19 has added insult to injury. With reverse migration of laborers, the industry is now even struggling to see its projects through.With a lack of laborers, many developers are struggling to resume construction work which is adding to the project cost. In this scenario, forget price reduction, mere survival should be considered an achievement for a smaller player.
China factor could fuel the churn:
With Indian government taking on China on the trade front, we have identified auto, Consumer Durables, Pharmaceuticals, Telecom, Chemicals and Renewable Power(Solar) sectors that could face severe disruption in their supply chain.While Auto and Consumer Durables are dependent on China for components, Pharma is dependent for API sourcing. Telecom is dependent on China from a network standpoint as well as for 4G smartphone handsets. China caters to more than 75% of the Indian handset demand. India is also a growing market with high demand for specialty chemicals and solar panels.
Key takeaways:
Market is likely to turn volatile after two months of significant run. While there is no denial about improving fundamentals, real estate remains far from any improvement in sentiments. The sector continues to see added costs and delay in project executions. The China factor also continues to linger on. If the government persists with its strategy of treating trade as warfare, India Inc should expect major disruptions coming their way. Considering the tight dominance of China over India's supply, finding alternatives or becoming self-reliant should be a distinct but ultimate goal for India Inc.
