Indian Economic Survey 2022: Key Highlights from Captial Market Perspective
The annual Economic Survey acts as a barometer for gauging Indian growth against the factual numbers. In this article, we will focus on key highlights.
The Economic Survey is a detailed document of 440+ pages, containing various data points to analyze the realization of the previous budget’s goal with numbers from the ground.
Before going through this article, I would strongly suggest you first go through the article — ‘Indian Market Outlook 2022: Top-Down Analysis’. This will help you to build the initial viewpoint for sectoral expectations, before going into the numbers of the Economic Survey.
For the scope of this article, we are trying to collate the key data points from the Capital Market point of view, which will help us to build a viewpoint for the Indian Equity Market –
- Supply Chain Disruption: Supply chain disruption has pushed the export cost to new highs, hurting many export-oriented Industries. Given we don’t get hit by other severe covid waves, we can expect the export cost to normalize in a year. Thus, improving export volumes.
- Metal/Commodities Super Cycle: Metal commodities can be seen in a super cycle, due to supply chain disruption & high local demand. Once the export costs revert to normal, we can expect some sector rotation.
- An early sign of Capex cycle revival: YoY the FDI flows has increased by almost 20%. This huge FDI in the manufacturing sector could be inferred as a structural bet on economic revival.
- Credit Cycle Growth for Banking Sector: Much waited credit growth has finally been started. This also signifies the demand uptick in the economy. Hence, this further validates our conclusion of India’s next decade of Capex-driven growth.
- Priority Sector Lending by NBFC: Same credit growth could also be seen in the NBFC sector (though, the growth rate is below average). Hence, it is safe to assume that going forward, the priority sector will have a relatively better time than the past 2 years.
- An early sign of Market Topping out: FPIs/FIIs fund pattern can also provide a good understanding of the market cycle, after all, they are dubbed as the ‘Smart Money’.
- Huge Scope for Insurance Industry Growth: Insurance Penetrations here is defined as the Total Insurance premium collected as a percentage of the County’s GDP.
Hence, even in the worst-case scenario, the Indian Insurance sector has room to grow twice in size, from the current state.
- An early sign of Inflation cooling off: Interesting insights on CPI inflation. The mid-term trend shows the mean reversion, without any stringent Monitory policy. Which could mean the growth in the Indian equity market could continue even in a weak global outlook.
- Real Estate sector revival: Interest among the home buyers is visible in the Real Estate Sector. Price growth suggests a clear interest in affordable Tier 1 cities (lower ranked Tier 1 cities), this might have happened because people now aspire to live close to roots. It will be interesting to see if this trend remains intact.
Conclusion:
Broadly the numbers have matched our expectations of various sectoral growth narratives. The only surprise was the falling inflation rate in the short term. But it will be interesting to observe whether this means reversion was due to govt subsidies. Or, it is structural — as the economy is opening up, it might be increasing supply-side capacity sufficiently to match the demands.
Overall, the above numbers suggest that the Indian story remains intact for the next decade!
P.S.: Thank you for reading this far, Hope this article has added some value. I’m looking forward to your Likes & Comments.
