RBI in its December policy meeting upgraded India’s GDP forecast and expects economy to shrink 7.5% this fiscal vs earlier forecast of 9.5% contraction as the economy is recuperating faster than anticipated. Further, even the IMF upgraded its forecast for GDP growth in FY22 (8.8% growth earlier to 11.5% growth) making it the only key nation to record a double-digit growth and reclaim the status of world’s fastest growing major economy.
Additionally, RBI expects growth to be in positive trajectory for Oct-Dec 2020 period and predicts a V-shaped recovery in FY21 driven by rollout of vaccine. Also, since mid-September, India has done well to flatten the curve of Covid-19 cases. The number of active cases had fallen to 1.5 lakh from a peak of 10 lakh cases in September.
The year 2020 has been more than what we bargained for. From a pandemic called COVID-19 hitting almost the entire world, to the hardships caused by the lockdown to several businesses, to border tensions, and fears of a slump in corporate profitability, to cancellation and/or postponement of major sporting and social events, this has been quite a year so far.
The stock market in India has seen quite a roller-coaster ride. The S&P BSE Sensitive Index had fallen from a high of 42,273.9 in January 2020 to 25,638.9 in March 2020 (a fall of over 39%). This has been one of the sharpest falls in India’s stock market ever. However, the Index has staged a decent recovery, and at the end of June 2020, has risen to 34,915.8, which is a rise of 36% from the bottom of the year.
There are many concepts and thoughts through which one can see commodity businesses. They are termed as cyclical, low PE deserving companies and generally have restricted weightage in one’s portfolio.
Right Definition: We believe that any business or trade where goods are sold without any value addition or without any differentiation can be referred as commodity businesses. Here word “Value addition” has vital meaning and impact. Generally, metals, cement and agro stocks are considered as commodity business. We believe if company has capacity to resist to volatility in base commodity price due to scale, stock or other natural advantage it can be considered as different company from pure commodity play.