»Profit Hunter by Equitymaster

On This Day - 13 MAY 2020
Of India's 20 Trillion Stimulus Package and the Swoosh Index for a Swoosh Recovery

Tanushree Banerjee, Co-Head of Research

It's neither going to be V, U, W nor L, they say.

India's economic recovery patten is predicted to be unique. Economists have coined the term 'Swoosh recovery' for India.

Yes, it refers to the logo of the global sportswear company, Nike. It implies that India's post Covid-19 economic recovery could be sharp uptick.

Now that reminds me of the Swoosh index.

Back in the mid-1990s, Jardine Fleming Securities (now part of JP Morgan Chase) came up with the Swoosh Index. It was a theory that suggested the rationale for Nike's geographic selection of factories.

It claimed that once Nike selects a country for its newest factory site, economic growth, rising stock markets, and other foreign companies follow.

In fact, it also claimed that Nike's entry into a country is a clear signal of the country's manufacturing prowess over the next few decades.

That Nike set up factories in Japan in 1960s, went to South Korea and Taiwan in 1970s, followed that up with China and Indonesia in 1980s and finally went to Vietnam in 2000s, proves the point.

The reason I am referring to the Swoosh index is because Nike's exposure to India is currently abysmally low.

But the company has expressed desire to move out of Vietnam and has already moved a lot of its capacity from China.

Therefore, for India to show any signs of a Swoosh recovery, hopping on to the Swoosh index is a must.

{inlineads1}

And there lies the importance of the Rs 20 trillion Covid-19 recovery stimulus package announced yesterday by Prime Minister Modi.

Unlike the previous stimulus packages, this one is no longer a tiny fraction of India's GDP.

At about 10.2%, its among the biggest stimulus packages announced over the past few months by governments all around the world.

Will India's Stimulus Stoke the Swoosh Index?


Executing the package, keeping India's long-term economic interests in mind, will be key.

It's also a fact that India's importance in the global supply chain has never looked better. PM Modi himself referred to that.

Therefore, utilising the stimulus package to tighten India's presence in the global supply chain will be the fastest way to move up the Swoosh index. Any delay or disregard would cost India dearly.

{inlineads2}

True that Apple, Samsung and several smartphone manufacturers are already considering an expansion of their Indian capacities.

But the land, labour, liquidity, and legal reforms cannot remain on paper if the Make in India dreams are to be realised.

I expect to gather more cues about India's prospects on the Swoosh index over coming months.

Watch this space as I track these Rebirth of India megatrends closely.

Also read this editorial to know more about the Rebirth of India stocks which can help you create wealth.

Warm regards,

Tanushree Banerjee
Tanushree Banerjee
Editor, StockSelect
Equitymaster Agora Research Private Limited (Research Analyst)

PS: Did you miss Tanushree's Mega Summit - One Stock Crorepati? Access the summit as well as details of the one stock here...

Copyright © Equitymaster Agora Research Private Limited. 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

Disclosure & Disclaimer: Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. The Author does not hold any shares in the company/ies discussed in this document. Equitymaster may hold shares in the company/ies discussed in this document under any of its other services.

This document is confidential and is supplied to you for information purposes only. It should not (directly or indirectly) be reproduced, further distributed to any person or published, in whole or in part, for any purpose whatsoever, without the consent of Equitymaster.

This document is not directed to, or intended for display, downloading, printing, reproducing or for distribution to or use by, any person or entity, who is a citizen or resident or located in any locality, state, country or other jurisdiction, where such distribution, publication, reproduction, availability or use would be contrary to law or regulation or what would subject Equitymaster or its affiliates to any registration or licensing requirement within such jurisdiction. If this document is sent or has reached any individual in such country, especially, USA, Canada or the European Union countries, the same may be ignored.

This document does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Our research recommendations are general in nature and available electronically to all kind of subscribers irrespective of subscribers' investment objectives and financial situation/risk profile. Before acting on any recommendation in this document, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The price and value of the securities referred to in this material and the income from them may go down as well as up, and subscribers may realize losses on any investments. Past performance is not a guide for future performance, future returns are not guaranteed and a loss of original capital may occur. Information herein is believed to be reliable but Equitymaster and its affiliates do not warrant its completeness or accuracy. The views/opinions expressed are our current opinions as of the date appearing in the material and may be subject to change from time to time without notice. This document should not be construed as an offer to sell or solicitation of an offer to buy any security or asset in any jurisdiction. Equitymaster and its affiliates, its directors, analyst and employees will not be responsible for any loss or liability incurred to any person as a consequence of his or any other person on his behalf taking any decisions based on this document.

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.

SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

Equitymaster Agora Research Private Limited (Research Analyst) 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407