Teji Mandi: Three things investors should know on December 18, 2020

What to expect in FY2021? :

Kotak Institutional equities in its report have estimated strong

strong rebound in the Indian economy. It expects a 9.3% growth in real GDP by the next financial year. The report pegs the economic contraction at (-8.6%) in the current financial year. They are also expecting retail inflation to cool off to 4.7% versus 6.4% in FY2021.

The net profits of the Nifty-50 Index are likely to see a growth of 28% and 19% in FY22 and FY23. The report has further quoted that most Nifty-50 stocks are trading at peak or near-peak multiples after the recent bull run. Hence, the scope for a further uptick in the market remains limited in FY2021.

The assumption of strong GDP growth is based on no resurgence in Covid-19 cases and the gradual rollout of the Covid-19 vaccine. The RBI will continue to remain at the central stage. A lot will depend on how it handles the liquidity situation in the market. If the central bank decides to reduce the liquidity, we might see the upcycle coming to an abrupt end.

IKEA opens for Mumbaikars:

Swedish retailer IKEA's Navi Mumbai store started its operations on November 18. It is the second offline store for IKEA in India.

After the successful opening of Rs 1,500 crore store, the company also plans to open two smaller format stores in Mumbai within a year, said top executives at the company. The company has also increased its online sales in Pune, Mumbai, and Hyderabad to expand its E-commerce footprint.

IKEA's store in Bengaluru is under construction and is being expected to open in a year. In Delhi-NCR, it is planning to open a multiple format store including a combination of a shopping center, small stores, and big centers.

India's home decor segment is largely dominated by unorganized players. IKEA's entry is the biggest from an organized player in this market.

Several other players like Asian Paints, Urban Ladder, Pepper Fry, @home etc. are attempting to bring an organized structure to the industry. However, their operations remain at a nascent stage. The incumbent brands now need to show some urgency as IKEA threatens to run away with their market share.

Consumption continues to suffer:

The Covid-19 has pushed the overall consumption growth back by two years, said a report by Boston Consulting Group. The report suggests that total household consumption spending is likely to reach Rs 290-300 lakh crore by 2030. Similar estimates were earlier made for 2028.

The average annual household income is being expected to rise to around Rs 7.3 lakh by 2030. It is nearly 40% higher than it is today but 7-8% lower than the pre-COVID estimate.

Predicting anything that will happen ten years from now,in 2030, is going to be a wild guess. Recently consumer preferences have gone through a drastic change. Companies are yet to react and adjust to the new normal.

By 2030, companies have a fairly long time to innovate and launch products due to evolving preferences. The report, in no way, can assess this factor while making a forecast.

(To download our E-paper please click here. The publishers permit sharing of the paper's PDF on WhatsApp and other social media platforms.)

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