Car sales at half speed
The Indian market was strong in June. Carnegie Indienfond rose 6.1% this month.
Global risk appetite is returning as a function of economies opening up and central banks printing new money. The Fed is buying corporate debt, which sets a floor for risk.
India is the market that is lagging behind, as virtually all stock exchanges are back to the levels seen at the start of the year. Although the virus is not under control in India, the economy opened on July 1. Sixty percent of cases are in six major cities, including Bombay and Delhi. Rural areas are doing better, and have better economic conditions to consume at a normal level.
Sales of tractors and motorcycles are back at 75 percent of normal. Car sales are at 50 percent of normal. Maruti Suzuki normally sells 130,000 cars a month. In April sales stood still, in May it sold 20,000, and in June it sold 50,000. Thanks to new exhaust emissions standards that came into force on April 1, stocks are low at retailers. In July, we will probably be back to 100,000 vehicles sold. This is positive for the fund’s holdings in Motherson Sumi Systems and Kansai Nerolac Paint, which supply electrical wiring and car paint to Maruti.
Banks were given carte blanche, and do not have to report their bad debt losses for six months. The question is whether or not a return to evergreening of the credit system is positive. Meanwhile, many banks want to raise new capital. Whether this is to cover losses or to increase new lending remains to be seen.
“Reliance Industries goes from strength to strength.”
Reliance Industries goes from strength to strength. The sale of part of Jio Platforms to Facebook and others means that the company is already debt free. Reliance says that a sale of some of its oil refinery operations to Saudi Aramco is imminent and negotiations are ongoing. This gives the company the opportunity to further expand and invest in retail, telecommunications and fibre networks, as well as in content for its digital channels.