DSP Tathya - January 2024

While the consumer sentiment index displays a positive red-to-blue shift, suggesting a strong belief in India's growth story, the reality of consumption, particularly in passenger car sales, tells a different tale. Rural wage growth appears subdued.

The core number with no surprise continues it’s disinflationary trend, printing the lowest number since Mar’20. Although the headline figure is still above the target, it's not a cause for concern, given that most numbers have stabilized, attributing the deviation to a temporary spike due to an inconsistent monsoon.

The recent IIP figures reflect a significant impact from the high base effect, with November having fewer production days due to festivities. Last year, October's festivities resulted in higher production days for November '22. Manufacturing PMI has declined, suggesting a potential slowdown in December's IIP growth. Additionally, the WPI numbers indicate a return to an inflationary trend. These variations are currently more influenced by statistical base effects than a clear, sustained trend.

With Services PMI receding for the past 3 months, it has recovered recording a services surplus of USD14.6Bn, the highest in almost a year. E-toll collections have been rather robust, thus hinting on robust economic activity.

Credit to deposit shows marked strength, while money supply also made a decent rise. With RBI shifting away from it’s hawkish stance, and Fed hinting on interest rate cuts in 2024, G-Sec yields did come down.

On fiscal front, the government expenditure is bound to increase with elections under way.

Despite dollar depreciating, INR’s appreciation has been rather muted. With oil prices remaining low against the common perception, the Crude Indian Basket, therefore, records a massive downtick.

Debt investments from FIIs have seen a notable uptick, attributed to India's inclusion in Bloomberg EM index after JP Morgan Bond Index. The increased confidence in India's growth narrative is evident in substantial equity inflows, possibly reflecting a deeper belief in India. The SIP book remains robust.