Winning Strokes
#My recommended stock: Future Retail Ltd (Rs.48.20) bounced back last Friday, on the news that the Future Group has promised to pay banks an aggregate of ₹6,900 crore in two tranches by the end of the fiscal, mainly by selling its small format stores, in an attempt to work out a loan restructuring agreement with lenders.
Moreover, a coupon company giving Amazon the first right of refusal is a questionable proposition. Hence, Amazon.com's case will possibly not hold in the honourable Supreme Court of India, especially when it is allegedly trying to control the retail business of Future group, through unfair means.
On another positive development, the household savings in the US are at 60-year highs, and it’s fair to assume that retail stores there are likely to see a heavy foot traffic for months, as the vaccine is further distributed there.
In India on the other hand the pandemic-driven lockdown has a surprise element in household savings that have been falling steadily between 2014 and mid-2019, but fortunately have shot up by a hefty $200 billion in extra savings - which is a 20-year high, according to a foreign brokerage report.
Surprisingly, a vast portion of this savings is in cash only, which soared by a whopping 135% during the lockdown months, a report by UBS said, adding now household savings constitute as much as 58% of the gross capital formation while that of corporates is only 32%.
The $200 billion extra net savings in financial assets, which is as a percentage of GDP is close to the peak seen post-global financial crisis of 2008-09, is still growing and is granular and broad-based, and not concentrated in the hands of the rich.
Historically households have been funding a third of the capital formation of the rest of the Indian economy. Overall financial surplus from households has remained steady for the last seven to eight years – before rising from mid-2019.
This is likely to give a push to the retail sector, apart from the festive season sales, which starts with Eid al-Adha in July, 2021. I'm expecting the scrip to cross Rs.100 by Durga Pooja. Let's see..
By the way India with a population of ~1.3 billion has over the years become a sought-after retail destination with a growing base of young and affluent shoppers.
The retail sector contributes 10% to India's GDP and accounts for 8% of India's employment, according to Invest India, the country's investment promotion arm.
#The stock of Pasupati Acrylon Ltd (Rs.13.05) can be accumulated at dips near Rs.8.50/8.60. Keep the scrip on your radar.
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