The current scenario showcases the worst economic phase ever-witnessed in the last 20 years. The demand is adversely affected not only in the urban areas but also in rural areas to an extent never expected, while the economic recuperation is anticipated to happen in the year 2021.
According to the report by Centrum brokerage firm, the three back to back kinking decisions which are demonetization in 2016, commencement on the GST regime in 2017 along with outbursts of the NBFC crisis, are the reasons behind this ebb. The report claims high external vulnerabilities or natural calamities to be the reason behind all the last three slumps and current downturn phase to be “self-inflicted”
In our study of the “downturns” in the last 20 years, the current slowdown seems to be the most protracted and severe both in terms of time and its spread. The impact on both rural and urban demand has been unprecedented,” the report states.
The report also drew attention to the fact that no down has been coppiced and reinvigorated to normal without government interference. September quarter of FY2020 seems to be the last of economic agony and the economic standardization & growth is expected in Q1FY21-Q2FY21. However, a major portion of adversity has been passed but the journey towards economic normalization would be a gradual go with, as per the report.
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The report said, “though the worst seems to be behind us, this is going to be a slow ride towards a path of normalization”.
Centrum presented advice for investors to backtrack from the defensive portfolios and recommended increased investment in cyclical stocks such as Autos, corporate banks and so on.
“Therefore, we are underweight in both IT and Metals, neutral in Pharma and Telecom. Our top picks are a mix of value and rate cyclical: SBI, L&T, Bajaj Auto, RNAM, Bajaj Consumer and NCC,” the report said.
