Helping You Build Wealth With Honest Research
Since 1996. Try Now

MEMBER'S LOGIN

MEMBER'S LOGINX

     
Invalid Username / Password
   
     
   
     
 
Invalid Captcha
   
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Does this signify end of India story?
Tue, 29 Oct Pre-Open

Diwali is a festival of lights and colors. Traditionally the festive season is when most people concentrate their purchases. In fact, 30-40% of the annual sales for most retailers and consumer electronics manufacturers happen in this period. However, this time around the situation appears to be grim. Sales figures of top retail chains are faltering resulting in huge inventory pile ups. In fact, in some segments growth has even halved compared to the last year!

So, why is the urban middle class reluctant to spend this time around? Rising food inflation and interest rates has lowered the disposable income in the hands of consumers. And this is precisely the reason for slowdown in discretionary spending. Even freebies and discounts are unable to lure customers to shop.

It is important to note that a large part of the India growth story has been based on the consumption theme. However, considering that consumers have become more circumspect in spending on discretionary purchases the growth story has again come under the scanner. It should be noted that consumption is an important component of GDP growth. Hence, if consumption suffers, so will growth. Now we all know that India's FY 13 growth of 5% was decade low. With slowing consumption one would not be surprised if growth figure again comes under pressure in the coming years.

So, if the growth story has to be revived, consumption should pick up. And in order to boost consumption, disposable income should be increase. This happens when inflation is under check and there are strong employment opportunities. But unfortunately India is struggling on both counts.

The ugly truth is that inflation, especially food inflation, is hurting the common man. Also, with most businesses slowing down due to non-conducive operating environment like high interest rates and red tapism, employment opportunities have narrowed as well. All these factors have made consumers circumspect over their spending habits.

While cut in discretionary spend is a natural phenomenon during slowdown. However if it persists resulting in delayed consumption, India story is likely to suffer in the long term.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

View all commentaries | Archives

Read the latest Market Commentary


Equitymaster requests your view! Post a comment on "Does this signify end of India story?". Click here!

  
ABOUT EQUITYMASTER

Since 1996, Equitymaster has been the source for honest and credible opinions on investing in India. With solid research and in-depth analysis Equitymaster is dedicated towards making its readers- smarter, more confident and richer every day. Here's why hundreds of thousands of readers spread across more than 70 countries Trust Equitymaster.

PREMIUM PRODUCTS
QUICK LINKS
POPULAR TOPICS
TRENDING TOPICS
FREE NEWSLETTERS
EQUITYMASTER SUPPORTS
  • HelpYourNGO
  • You Tube
  • Linkedin
  • Twitter
  • Telegram
  • Google Play

Copyright © Equitymaster Agora Research Private Limited.

Whitelist | Refer | Terms | Privacy | Contact | About | Sitemap

Phone +91-9136015013

Equitymaster Agora Research Private Limited (Research Analyst)
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Email: info@equitymaster.com. Website: www.equitymaster.com.
CIN:U74999MH2007PTC175407

Name of the Compliance & Grievance Officer: Ms Sonal Ramachandran
Telephone: +91-22-61434003 | Email: compliance@equitymaster.com

LEGAL DISCLAIMER:
Investment in securities market are subject to market risks. Read all the related documents carefully before investing.
Registration granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.

All rights reserved. Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA, Canada or the European Union countries, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.