Can Indian economy thrive amidst market slowdowns and tech layoffs? A Balasubramanian answers
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MD & CEO,, says Indian markets are consolidating amidst favorable interest rates and strong agricultural output, boosted by a good monsoon. The upcoming festival season is expected to further stimulate the rural economy. Government infrastructure spending continues to drive cement and steel sales. While bilateral trade deals offer potential benefits, technological disruptions, exemplified by TCS layoffs, are causing some market caution.If you look at various lead indicators , except for a few of the high frequency indicators like cement and steel, in general we are seeing some bit of slowdown which of course also reflects in the IIP numbers . The narrative has come from the financial sectors, especially one of the leading finance companies have said that MSMEs have been slowing down and therefore there could be a possibility of delinquencies. That is not uniform and each company has different narratives to give. But broadly people are a bit cautious and there has been some bit of pressure in terms of lending growth, more than anything else, as the lending growth becomes very aggressive, then naturally they will have enough earnings. They will manage some of the other challenges that they may have. But the current narrative is coming from financial sectors, largely related to the lending growth being lower than what they could have otherwise done.Certain segments of the market have done pretty well. Banking has done pretty well because the cost of financing has come down, thanks to the rate cut, and definitely the cost of borrowing has been coming down, CASA ratios have come down and even from the borrowers point of view, being linked to the repo rate, the lending rates have come down. The MCLR is also down by about 50 basis points. We cannot come to judgment on the basis of the one quarter numbers. We still have a long way to go.This quarter, keeping in mind the current situation, the companies also must be playing a little cautious and making a little higher provision so that they will be able to manage things as we move forward in the next two-three quarters.Yes, of course, one, leave aside the earnings for the time being. Earnings are keeping the market under check as well as whatever the tariff outcome is. But if you leave that aside, clearly for the rest of the financial year, definitely the interest rate is going to remain favourable and agriculture crop, not even the sowing, even the agriculture output that has come in the last one, one-and-a-half months, have been pretty good and the monsoon has spread across the country well. The water levels are pretty good and in the next two-three quarters, visibility from agriculture income going up quite significantly is also high.The festival season has been supported by growth coming back with a low interest rate state regime. We will see the rural economy getting a kickstart. The festival season is starting early and we will have to see how it shapes up. We will probably see a good momentum coming back. We are not seeing any slowdown in terms of government-led infrastructure spending. We are continuing to see that momentum continuing and that is why cement sales and steel sales are up, mainly driven by the government's continued focus on infrastructure building.Therefore, the market is going through a consolidation phase. It is good to have markets go through a consolidation phase. It is preparing for some bit of time value correction which will also make the valuation attractive. As the number starts coming a little better, you would probably see that improvement coming back. The bilateral trade deals the US has entered into so far has proved to be favourable for both the countries. I would presume India too can expect a similar fate. But, we cannot speculate on this.We are definitely seeing a bit of slowdown where even a company like TCS is going for large-scale layoffs. This has nothing to do with the government and has something to do with the technological disruptions and this to some extent would make people a bit cautious.Largely, it starts from the autos. Two-wheelers have been doing well, but at the same time, in the last few months, it also has gone through a marginal sales growth. But two-wheelers basically address the common man's needs across the country, including rural as well as urban India, where we should see some kind of pickup.The second is consumer spending, especially in the festival season. Generally the household spending in terms of refurbishing as well as other household items will also improve as the demand generally goes up. Financing will also be made available for this segment of the market. Therefore, even in consumer durables, we should see some kind of a pick up as a result of the increase in spending in the coming festival season.The tractor numbers are far better than what was expected, almost about 6% registration growth has come which in some sense is good as people are spending on agriculture and that is reflecting in the growth momentum. There are no true indicators of consumption pick-up. The true indicator will come from autos as well as consumer durables.: Global uncertainty is not just driven by tariffs and now is coming to an end. The other important factor from a global market point of view is the disruption in the technology world and the oil prices which have been lying low and could also have its own impact. The general slowdown that we are witnessing in the global market could probably keep it under check for some more time given the fact nowhere in the world we can say the valuations are very cheap and therefore we will always have that holding back the investment decisions.Having said that, I would say there is a significant slowdown. The Fed governor would probably cut more aggressively than what he had done in the last few years. In the last six months, no rate cut has come. The US will not hesitate to cut the rate quite substantially to boost the overall sentiment and get back on the growth path. Therefore, in the next three-four months, we will have to keep a close watch on how each of the moving parts will drive the sentiment.
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