Do you know the Stock holdings of Ace Investors (Market Gurus) of India?

Stock Holding by Stock Market Investors
by Nikita Bhoota 09/04/2020

The buy and sell activities of market gurus such as Rakesh Jhunjhunwala, Radhakishan Damani, Ashish Kacholia etc in the stock market are eagerly watched by investors. Some of the investors prefer to replicate the stock investments of ace investors to earn superior returns in the long- term. Ace investors generally carry out in-depth research which helps them to identify the best stocks for investment purposes and multiply their money in the long-run. Analysing is not an easy task for a common investor as it requires huge knowledge and is a time-consuming process. However, before replicating the market gurus portfolio, investors should consider their risk appetite, time horizon and should also know the business of the companies.

So here, we have discussed the portfolio holdings of some of the top 5 ace investors as of the quarter ending June 2020. They hold more than 1% of the total number of shares in the company. These ace investors also invest in the name of their family members and their own companies. However here, we have collated the holding details as much as possible directly owned by the ace investors in their name.

Rakesh Jhunjhunwala
Rakesh jhunjhunwala is a well-known name in the Indian stock market. He is the biggest investor/trader in the Indian markets. He is also known as the Indian Warren buffet. A qualified chartered accountant manages his portfolio with his asset management company Rare Enterprises. He invests in his name as well as in his wife’s name Rekha Jhunjhunwala. His investments are closely monitored by media and market investors.
 

Company Name

Holder's Name

No. of Shares

Holding (%)

Agro Tech Foods Ltd.

Rakesh Jhunjhunwala

4,93,700

2.03

Agro Tech Foods Ltd.

Rakesh Jhunjhunwala

3,10,000

1.27

Anant Raj Ltd.

Jhunjhunwala Rakesh Radheshyam

1,00,00,000

3.39

Aptech Ltd.

Jhunjhunwala Rakesh Radheshyam

50,94,100

12.65

Autoline Industries Ltd.

Jhunjhunwala Rakesh Radheshyam

10,20,000

3.77

Bilcare Ltd.

Jhunjhunwala Rakesh Radheshyam

17,35,425

7.37

CRISIL Ltd.

Jhunjhunwala Rakesh Radheshyam

21,06,750

2.91

Delta Corp Ltd.

Jhunjhunwala Rakesh Radheshyam

1,15,00,000

4.28

Dishman Carbogen Amcis Ltd.

Jhunjhunwala Rakesh Radheshyam

25,00,000

1.59

Edelweiss Financial Services Ltd.

Jhunjhunwala Rakesh Radheshyam

1,11,25,000

1.19

Escorts Ltd.

Rakesh Jhunjhunwala

91,00,000

7.42

Firstsource Solutions Ltd.

Rakesh Jhunjhunwala

2,00,00,000

2.88

Fortis Healthcare Ltd.

Rakesh Jhunjhunwala

2,00,00,000

2.65

Geojit Financial Services Ltd.

Jhunjhunwala Rakesh Radheshyam

1,80,37,500

7.57

GMR Infrastructure Ltd.

Jhunjhunwala Rakesh Radheshyam

8,50,00,000

1.41

Ion Exchange (India) Ltd.

Rakesh Jhunjhunwala

5,77,500

3.94

Ion Exchange (India) Ltd.

Jhunjhunwala Rakesh Radheshyam

1,97,500

1.35

Karur Vysya Bank Ltd.

Jhunjhunwala Rakesh Radheshyam

3,59,83,516

4.5

Lupin Ltd.

Rakesh Jhunjhunwala

66,45,605

1.47

Man InfraConstruction Ltd.

Jhunjhunwala Rakesh Radheshyam

30,00,000

1.21

Multi Commodity Exchange Of India Ltd.

Jhunjhunwala Rakesh Radheshyam

20,00,000

3.92

NCC Ltd.

Rakesh Jhunjhunwala

1,16,00,000

1.90

Orient Cement Ltd.

Jhunjhunwala Rakesh Radhesham

25,00,000

1.22

Prakash Industries Ltd.

Jhunjhunwala Rakesh Radheshyam

25,00,000

1.46

Prozone Intu Properties Ltd.

Rakesh Jhunjhunwala

31,50,000

2.06

Rallis India Ltd.

Rakesh Jhunjhunwala

51,82,750

2.67

The Federal Bank Ltd.

Rakesh Jhunjhunwala

6,23,21,060

3.18

The Indian Hotels Company Ltd.

Jhunjhunwala Rakesh Radheshyam

1,25,00,000

1.05

The Mandhana Retail Ventures Ltd.

Jhunjhunwala Rakesh Radheshyam

28,13,274

12.74

Titan Company Ltd.

Jhunjhunwala Rakesh Radheshyam

3,93,10,395

4.43

VIP Industries Ltd.

Rakesh Jhunjhunwala

52,15,000

3.69

Source: Ace Equity

 

Also Read: Big Bull Rakesh Jhunjhunwala's Portfolio 2021


Radhakishan Damani
Radhakishan Damani is known for his low profile and hardly ever appears in public events or TVs. He is also the mentor for Rakesh Jhunjunwala and the single largest shareholder of Avenue supermarts (D-mart). He is also known as retail king of India. He runs two investment firms- Derive Investments and Brightstar Investments Pvt Ltd. 

Company Name

Holder's Name

No. of Shares

Holding (%)

Astra Microwave Products Ltd.

Radhakishan S Damani

8,96,387

1.03

Avenue Supermarts Ltd.

Mr.Radhakishan S. Damani & Mrs.Shrikantadevi Damani (On Behalf Of Mountain Glory Pvt Beneficiary Trust)

1,80,00,000

2.78

Avenue Supermarts Ltd.

Mr.Radhakishan S. Damani & Mrs.Shrikantadevi Damani (On Behalf Of Royal Palm Pvt Beneficiary Trust)

1,80,00,000

2.78

Avenue Supermarts Ltd.

Mr.Gopikishan S. Damani & Mr.Radhakishan S. Damani (On Behalf Of Karnikar Pvt Beneficiary Trust)

1,80,00,000

2.78

Avenue Supermarts Ltd.

Mr.Gopikishan S. Damani & Mr.Radhakishan S. Damani (On Behalf Of Gulmohar Pvt Beneficiary Trust)

1,80,00,000

2.78

Avenue Supermarts Ltd.

Mr.Radhakishan S. Damani & Mrs.Shrikantadevi Damani (On Behalf Of Bottle Palm Pvt Beneficiary Trust)

1,80,00,000

2.78

Avenue Supermarts Ltd.

Radhakishan Shivkishan Damani

22,21,59,156

34.3

BF Utilities Ltd.

Radhakishan Shivkishan Damani

4,91,000

1.30

Kaya Ltd.

Radhakishan S Damani

1,44,464

1.11

Mangalam Organics Ltd.

Radhakishan S Damani

1,86,187

2.17

Prozone Intu Properties Ltd.

Radhakishan Damani

19,25,000

1.26

Simplex Infrastructures Ltd.

Radhakishan S Damani

13,00,000

2.28

SpencerS Retail Ltd.

Radhakishan S Damani

16,61,324

2.09

The India Cements Ltd.

Radhakishan S Damani & Gopikishan S Damani

41,45,103

1.34

The India Cements Ltd.

Radhakishan S Damani

3,34,52,777

10.8

VST Industries Ltd.

Radhakishan S. Damani

7,67,823

4.97

Source: Ace Equity

Ashish Kacholia
Ashish Kacholia is known for his mid- and small-cap picks. Mr. Kacholia is fondly called as Big Whale’ by the media. He started his career with Prime Securities and later moved to Edelweiss before establishing his broking firm, Lucky Securities. Ashish Kacholia along with Rakesh Jhunjhunwala, Neeraj Roy, Lashit Sanghvi,and Hiren  Ved founded Hungama Digital Media Ltd in the year 1999..Mr. Kacholia started focusing on building his own portfolio in the year 2003.

 

 

 

Company Name

Holder's Name

No. of Shares

Holding (%)

Acrysil Ltd.

Ashish Kacholia

11,05,930

4.14

Apollo Pipes Ltd.

Ashish Kacholia

4,68,969

3.58

Apollo Tricoat Tubes Ltd.

Ashish Kacholia

Next Article

5 Evergreen Stocks for Investment

5 Evergreen Stocks for Investment
by Nikita Bhoota 13/04/2020

The Indian stock market has recovered from March 2020 lows supported by the huge global liquidity and coordinated efforts by countries across the globe to fight coronavirus (Covid-19) pandemic. Easing lockdown rules and improving domestic auto sales numbers also supported the market growth. In addition to this, the changes in the norms for multi cap funds by the market regulator SEBI is witnessing huge buying in the midcap and small cap stocks. However, the rally in midcap and small cap index may be for short period of time as the fund managers have to reshuffle their multi cap funds portfolio. The benchmark indices Sensex and Nifty jumped ~49% and ~50% respectively from March 2020 lows to October 01, 2020

Finding out good quality stocks in the market where investors are planning to liquidate their portfolio to take the benefit of rise in markets is a real challenge. 5 paisa have eased the investors work to find quality stocks for investment. We have selected 5 stocks that have overcome the market challenges and have given consistent returns in the long run. The stocks are chosen after studying the fundamentals, management history, and business prospects of the company.

Larsen and Toubro (L&T)

L&T prefers to sit tight (for now) on the post-tax cash proceeds of ~Rs110bn from the sale of its Electricals & Automation (E&A) business to Schneider Electric. Debt reduction in the Hyderabad metro project (HMP) will be executed after the receipt of VGF from the state government. Management expects any meaningful growth in core revenues to be skewed towards 4QFY21, as a heavy monsoon and localised lockdowns continue to hurt execution in 2QFY21. Amid the challenging environment, Infra, Power T&D, and Water are expected to lead the recovery. Large opportunities in Defence have been in the WIP phase for a long time now, and any traction in decision making will bode well for L&T. In addition, of robust order book of 306,280cr (~3x TTM sales) Q3FY20 provides healthy revenue visibility for the next 2 years. We expect revenue and PAT CAGR of 6% and 3% respectively over FY20-22E. The stock currently trades at 17.6x FY21EPS.

Year

Net Sales (Rs Cr)

OPM (%)

Pre Exc PAT (Rs Cr)

EPS (Rs)

PE (x)

FY20

1,45,452

11.2

9,549

68.0

13.3

FY21E

1,44,713

10.8

7,194

51.2

17.6

FY22E

1,64,226

11.7

10,171

72.4

12.5

Source: 5paisa Research

HDFC Bank

HDFCB indicated that it had a very capable set of business leaders to take over from those who have left recently. Incrementally, it is finding robust growth opportunity in corporate loans without taking significant risk and has seen very positive trends in its retail/SME customer profile from a cash flow perspective. Just 9% of loans are under moratorium. Continuous efficiency improvement would support profitability. Given strong commentary and financial performance, we expect the valuation overhang to diminish. HDFCBs customer quality, deposit position and capitalisation are among the best in the sector. This will enable it to strongly gain market share in the long term The stock trades at 3.1x P/BV FY21E.

Year

Net profit (Rs Cr)

P/BV (x)

ROE (%)

FY20

26,260

3.6

16.4

FY21E

27,930

3.1

15.1

FY22E

35,380

2.7

16.5

Source: 5paisa Research

Hindustan Unilever (HUL)

HUL is looking at the HFD (Health Food Drinks) category as a penetration opportunity with rural penetration at 27% much lower than urban at 60%+. 25% of India’s population is under 14 years, with ~33% suffering from stunted growth, 25% from malnutrition and ~90% from micronutrient deficiency. Even in the southern and eastern regions, where Horlicks and Boost have a dominant position, rural penetration is 26-28%, while urban penetration is 60-67%. Management would focus on mobilising penetration in the southern and eastern regions, followed by the North and the West.  The company would also focus on expanding the nutrition category, through hi-science variants, targeting the maternal & women’s nutrition and adult deficiency & wellness categories, in the medium term. Since the announcement of the acquisition in December 2018, there has been a margin expansion of 250-300bps, executed by GSK itself Management has guided for another 550-700bps margin expansion in the medium term driven by Scale benefits in media and materials buying, optimisation of depots and route to markets and efficiencies in supply chain, such as logistics, distribution and factory operations. We estimate PAT CAGR of 19% over FY20-22E. The stock trades at 60x FY21EPS.

Year

Net Sales (Rs Cr)

OPM (%)

Net Profit (Rs Cr)

EPS (Rs)

PE (x)

FY20

39,100

25.3

6,900

29.4

71.3

FY21E

44,500

26.3

8,200

34.9

60.0

FY22E

48,800

28.1

9,700

42.5

49.3

Source: 5paisa Research

Hero Motocorp

Demand in rural and semi-urban markets is robust (better than urban), driven by a good Rabi crop, lower impact of the Covid-19 outbreak and forecast of a normal monsoon. As recovery is led by rural, share of scooters in the 2W industry may not increase in the near-term. Hero’s dealer inventory level is very much under control. Management is focussed on growing its exports (currently at ~3%). In Phase-I, Hero created a good footprint in more than 40 markets and made efforts to leverage its existing products. In Phase-II, it is focussing on developing customised products for each market cluster. With the BS-VI transition behind, R&D has better bandwidth for such product customisation. We expect revenue CAGR of 9% over FY20-22E. The stock currently trades at 26.2x FY21EPS.

Year

Net Sales (Rs Cr)

OPM (%)

Net Profit (Rs Cr)

EPS (Rs)

PE (x)

FY20

28,836

13.7

3,198

160.1

19.7

FY21E

27,094

12.1

2,398

120.1

26.2

FY22E

34,294

13.1

3,378

169.2

18.6

Source: 5paisa Research

Reliance Industries Lid (RIL)

RIL has aggressive growth plans for the retailing business; in the next 12-18 months, it plans to scale up the JioMart (on-line ordering and fulfilment) vertical and introduce other merchandise on this platform (pharmaceuticals, fashion and electronics etc). Simultaneously, Reliance Retail Ventures (RRVL) also plans to focus on expansion in tier II/III and IV cities, to expand its retailing space and grow its off-line presence. Recent agreement to acquire retailing and logistics assets of Future Group bodes well in this regard. Perhaps, cash mobilised through induction of strategic investor(s) would go a long way towards meeting this objective. We expect revenue and PAT CAGR of 19.5 and 12.7 respectively over FY20-22E. The stock currently trades at 24.5x FY21EPS.

Year

Net Sales (Rs Cr)

OPM (%)

Net Profit (Rs Cr)

EPS (Rs)

PE (x)

FY20

596,700

14.8

43,800

69.1

19.3

FY21E

774,900

10.1

34,600

54.6

24.5

FY22E

852,100

12.0

55,600

87.7

15.2

Source: 5paisa Research

 

Next Article

Indian Market update and Investment Recommendation

Indian Market update and Investment Recommendation
by Nikita Bhoota 13/04/2020

The Indian equity market is in a bad phase and this is the most difficult period for investors in the stock market. The benchmark indices Nifty 50 and Sensex have plummeted significantly in the past one month.

nifty graph

Source: Ace Equity, NSE, BSE
# Data from March 02, 2020 to April 08, 2020

Both the indices Nifty50 and Sensex are down 21.4% and 21.6% respectively from March 02, 2020- April 08, 2020. Fear of worldwide slowdown due to the aggressive spread of coronavirus (Covid 19) disease has affected investors’ confidence.

Currently, as per the media reports, the number of cases of the coronavirus across the globe crossed the 1.4 million and the global death toll is around 83,200. The death toll in India has risen to 164 and the number of cases has crossed 5,000 mark. However, the cases can further rise in India as well as at the global level because no country in the world is successful in finding vaccine for Covid 19 disease. Due to spread of Covid 19 India could face a major slowdown in its domestic numbers. India’s GDP growth is expected to fall by ~3% as per the media reports due to pandemic. However, to control the spread of Covid19 and to minimize the economic and social impact, the Indian Government has announced 21 days lockdown.

Sector Impact of Covid 19 spread

The sectors which are going to be worst affected due to this Pandemic are banking, automobile, tourism, hospitality, aviation, transportation and restaurant businesses. Most of these sectors are forced to halt as their operation as India is heading towards stage 3 of coronavirus outbreak.

sector performance1png

Source: Ace Equity, NSE
# Data from March 02, 2020 to April 08, 2020

Investor’s current reaction in the falling market

After, witnessing such a huge fall in the market, most of the investors are rushing to liquidate their portfolio and book loss in a view that market will fall further. However, selling the portfolio in a falling market is not the right approach.

Recommendation

This is the best time to build your portfolio to get the superior returns over next 3-5 years. We expect Pharma and FMCG to be least impacted so on safer side and financials is the other sector which is quite attractive valuation wise. Investor can consider the following stocks for investment purpose.

Stocks

Rationale

Bajaj Finance

Has strong competitive position, better client acquisition and asset quality to be least affected to other NBFC's. The current valuation of 3.4x on FY21E, P/ABV is attractive.

ICICI Lombard

Covid-19 is not expected have significant impact on account of lower share of indemnity policies and low treatment cost (treatment at Government hospitals). All the growth drivers are intact and post huge correction, the stock trades attractively at 33.3x on FY21 EPS.

SBI Life

We believe that SBI Life would continue outperforming peers and be a bigger beneficiary of the market share loss in LIC. Moreover, Life insurance in India is underpenetrated and SBI Life’s share of retail protection in its mix, is lower compared with peers, presenting good headroom for growth.

HDFC

Considering the strong contribution from insurance + asset management subsidiaries and fair value of its stake in HDFC Bank, we believe that the market is undervaluing the standalone business despite its best-in-class asset quality.

Ipca Labs

Strong volume growth in the domestic market and improving sales representative productivity rate are likely to result in better than industry standard growth rate.

Sun Pharma

Sun Pharma’ India and RoW markets are on solid footing and are able to generate sizeable FCF every year. Concerns about slow ramp-up in the specialty business are appropriately factored in and a marginal uptick in specialty revenues would help improve profitability.

Hind. Unilever

HUL is likely to remain least impacted in an event of mass-scale breakout. Strong cash flows/margin defense would provide safety during deteriorating conditions.

Next Article

High Dividend Yielding Stocks

High Dividend Yielding Stocks
by Nikita Bhoota 15/04/2020

Investors in the stock market have different the risk appetite and financial goals. People with high risk-taking capacity invest in stocks that offer capital appreciation and involves more risk. On the contrary, investors with low risk appetite invest in high dividend yielding stocks which give stable income.  Moreover, when markets are facing a downturn, dividend stocks usually do not get into a free fall, and likely to outperform most of the time. 

Dividend yield is the annual return which the stock pays in the form of dividends. Dividend yield is calculated by dividing the dividend per share (DPS) by current market price (CMP).

The Indian equity markets Nifty 50 and Sensex are down 18.2% and 18.3% respectively from March 02, 2020- April 09, 2020. Fear of worldwide slowdown due to the aggressive spread of coronavirus (Covid 19) disease has affected investors’ confidence. Moreover, Post the Rs 1.7 lakh cr stimulus declared by the finance minister, expectations are high from the Reserve Bank of India to slash interest rates.

Therefore, high dividend yield stocks are worth investing in wake of falling interest rate scenario. Additionally, investing some of the corpus in high dividend-yield paying companies with strong fundamentals can cushion investors’ portfolios in case of an event of a fall but only to an extent.

Based on historical dividend yields following are some of high-dividend yielding stocks.

Company Name

Dividend Yield (%) FY19

3 years average Dividend Yield (%)

SJVN Ltd.

8.9

7.8

REC Ltd.

7.2

6.6

NLC India Ltd.

6.5

6.2

NHPC Ltd.

5.9

5.5

Indian Oil Corporation Ltd. (IOCL)

5.7

7.5

Hindustan Petroleum Corporation Ltd.

5.6

5.4

Coal India Ltd. (CIL)

5.5

6.0

Oil India Ltd.

5.5

5.6

Source: Ace Equity

The above- listed companies are some of the high dividend yielding companies on a consistent basis. 3 years average dividend yield for SJVN, REC, IOCL, Coal India and Oil India stood at 7.8%, 6.6%, 7.5%, 6% and 5.6% respectively. SJVN is a power generation company, operates hydro, wind and solar plants. CIL has leading position in coal mining and produces 80% of the country’s coal output. 

Most of these high dividend-paying companies have healthy cash reserves which could be utilized for paying dividends in difficult times as well when the core businesses get impacted.  Investing in high dividend yielding stock in a falling market sounds wise, but the investor should prefer investing in the companies that are fundamentally strong and have appreciated a little in the recent past months. There have been examples of loss of invested capital, hence the investor must ensure that he should not end up into value trap in the chase of high dividend. Thus, high dividend yielding stocks with strong fundamentals can be a safe investment bet in times of uncertainty in the market.

Next Article

Why are retail investors rushing to invest in a falling market?

Why are retail investors rushing to invest in a falling market?
16/04/2020

In the last 2 months, the stock indices corrected by as much as 33% including two lower circuits of 10%. However, in this entire melee, retail investors have not lost their appetite for buying stocks at lower levels. While it is hard to quantify, one metrics that captures sustained retail interest even in volatile markets is the SIP flows.

monthly net sip
Data Source: AMFI

Market volatility or otherwise, the SIP flows have been on a consistent ascendant all the way to Feb-2020. SIP flows typically represent retail flows into equity funds. That is the predominant representation. SIP flows give investors the benefit of rupee cost averaging and for someone who has been running the SIP over the last five years, the losses would be minimal.

Long term approach has finally taken roots

Between 2014 and 2019, the total AUM of Indian mutual funds grew from Rs.8,00,000 crore to Rs.28,00,000 crore. That was driven by a massive expansion of retail money. A large part of the retail money has come through SIPs and the presence of over 3.2 crore SIP accounts is testimony that retail investors have adopted a systematic and long term approach to investing. Also, there is a greater tendency to prefer the mutual funds route over the direct equities route as it gives them the comfort of diversification. However, the retail investor of 2020 is not led by a Pied Piper like in 1992 or by penny stocks like in 2005 or by lofty stories like technology and realty. With long term investments systematic, there is the appetite to nibble at quality stocks at lower levels. That is what explains the retail appetite for equities even after such a sharp fall.

Is the optimism to buy falling stocks justified?

If you do a quick back-test, there are two basic takeaways that emerge. Firstly, as long as you don’t try to catch falling knives you are safe in buying falling stocks. That has two implications. Firstly, don’t buy the sectors that drove crazy valuations. Secondly, buy stocks that have sustained growth in the past. Armed with these two principles, let us look at how markets have reacted after every sharp correction in the last 30 years.

falling stocks table
Data Source: BSE

The above table refers to how the Sensex has reacted after every major correction in the last 30 years.

Clearly, after every strong correction, there has been a rebound that has taken the markets well beyond the previous highs. Such bounces have lasted from a few months to as long as 4 years but a diversified index like the Sensex always gets the better of volatility. The argument appears to be that if you time the purchase of quality stocks at these lows, then your returns could be impressive and also quick. For example, if an investor was willing to buy HDFC Bank at Rs.1300, there is no reason not to buy the stock at Rs.800.

That is exactly what retail investors are trying to do. Traditionally, retail investors have tended to buy at highs and panic and sell at low levels. That was largely due to leveraged positions. With exposure to non-leveraged products like equities and mutual funds, that risk is substantially lower.

Financial planning approach of millennials

One way the correction of 2020 is different from the previous major corrections like 2000 or 2008 is the presence of a larger millennial population active in equities; either directly or indirectly. Most millennials have adopted a more technology savvy DIY approach to financial planning. Allocation to different asset classes has ensured that they are not entirely exposed to equities.They can, therefore, afford to take a calculated wager on equities.

max min returns

Source: BSE

What the above chart shows is that as investors hold a diversified portfolio for more than 5 years, the probability of negative returns is very small. Hence nibbling at equities that have been beaten down is a luxury that they can afford. Anyways, as long as they are diversified and invested for the long haul, there risk is very low.

Don’t forget the gold factor

The World Gold Council has estimated gold with Indian households at 22,000 tonnes. That is worth $1.20 trillion at current prices. With gold prices up by over 30% in the last one year, Indian households have seen $300 billion of idle wealth being created. While just about 6% of Indian households are exposed to equity, nearly 40% of the households are exposed to gold. It is this wealth effect that is now being monetized and leveraged. Equities at current valuations are just giving them the right opportunity! The question is; why not?

Next Article

Where is the Indian Economy headed, amidst Coronavirus?

Where is the Indian Economy headed, amidst Coronavirus?
16/04/2020

After the prime minister of India announced the 1st lockdown to check the spread of the Coronavirus, it appeared to virtually put the brakes on the Indian economy. While we will come back to the economy later, an early shutdown has helped India keep the spread of the virus under control. Check the chart below.

Covid-19 graph
Data Source – World-O-Meters (26th Mar 2020)

Ironically, Europe appears to have become new epicentre of the Coronavirus with Italy and Spain overtaking China in terms of number of fatalities. On the global scale of over 192 countries affected by the virus (COVID-19), India ranks 43rd in terms of the number of afflictions and 33rd in terms of the number of deaths. That is actually remarkable for a country with a population of 1.30 billion, average per capita income of less than $2000 and astonishingly crowded urban jungles.

Package for the vulnerable sections

One thing that was immediately announced by the Finance Minister on 26th March was an antidote package in the midst of the shutdown. The package includes cash transfers for rural and semi-urban housewives, direct benefit transfers to vulnerable sections for loss of jobs, health insurance for health workers, free access to LPG and food grains for the BPL families for a period of 3 months etc. In addition, the government package will also enable payment of wages during the lockdown period, sponsor the payment of EPF contributions and ensure medical relief and alternate employment for the less privileged families. This may not stave off the slowdown but will lessen the pain at the grass-root level.

How will the Coronavirus impact the GDP growth?

The GDP data has been showing a linear fall since June 2019. While there was a marginal bounce in Dec-20 quarter, the pandemic driven shutdowns could queer the pitch -

Annual GDP

Data Source: MOSPI

These are still early days but FICCI has pegged the potential losses to the Indian economy at around $120 billion. That is approximately 4% of GDP lost in the next couple of quarters. This is the direct impact and the indirect impact could be bigger. This implies two things. Firstly, the fourth quarter GDP for FY20 and the first quarter GDP for FY21, could grow by just about 2.5-3.0% and that would not be great news for the India growth story. Secondly, the impact of weak growth will be immediately felt on consumption demand and also on direct and indirect tax collections. Those would be the secondary risks.

 

Fiscal deficit could spill out of control

For FY20 and FY21, the last Union Budget had already expanded the fiscal deficit target by 50 bps to 3.8% and 3.5% respectively. For FY20, the 3.8% GDP target assumed sharp spending cuts. On the contrary, the government is now doling out a Coronavirus rescue package worth Rs.175,000 crore. That would mean, the fiscal deficit could spill beyond 4% in the current and next fiscal; with serious ramifications for bond yields and for sovereign ratings. The problem of fiscal deficit gets compounded because of weaker tax revenues and also because some of the divestment candidates like LIC and Air India are likely to face a tough quarter ahead.

All is not bad; there is good news on the oil front

The one good thing about weak economic growth is the dividend of cheap oil. Oil has fallen sharply in the last 3 months as is evident from the graph below.

oil price crashes
Chart Source: Bloomberg

Brent oil prices have more than halved since Jan-20 due to slowdown fears and a Saudi glut. However, there is a sunny side to it. India relies on imports for 85% of daily crude oil needs and the import bill could sharply go down. Apart from reducing monthly trade deficit to well below $10 billion, it will also push the current account into a surplus. Above all, weak oil prices will mean less pressure on inflation. It opens the gates for RBI to cut repo rates to give a boost to the economy.


Best part; it will match supply to demand

This is likely to be one unspoken benefit of the lockdown in India in the aftermath of the COVID-19 pandemic. Most sectors like capital goods, automobiles, FMCG products and aviation have seen a massive demand crunch in the last few months. Now the supply will be able to match with the demand. Hopefully, by the time the situation normalizes, the massive infusion of liquidity will open the floodgates of demand once again. That will be the trigger for economic growth, but for that we will have to wait out the pandemic.

What does this mean for investment strategy? Conserve liquidity so you are able to buy quality stocks at really low prices. The ideal approach is to first wait for the VIX to stabilize at lower levels as there is no point catching a falling knife. If growth returns and you get multi-baggers, you may eventually thank the chaos created by the COVID-19!