Last Updated on Feb 14, 2022 by Aradhana Gotur
Dick Host Mody is the founder of Ethical Advisers and a 30-yr veteran in the Indian equity markets.
2020 – Mankind challenged!
We all love going to the movies. I, for one, love science fiction (sci-fi). Tales of superheroes, futuristic wars within various civilisations in the Universe, sometimes of Time Travel and the fiction of mass destruction or contagions have held our attention in plush airconditioned halls for a few hours. That’s what we like- and it is called ENTERTAINMENT. A few munches of popcorn and samosas, and the show ends with a HAPPY ENDING. But no one in the world had imagined in Jan 2020 that one such scenario would literally pop OUT of the screen and hit the world with force never foreseen-enter The Pandemic!
The impact – unimaginable pain!
Mankind has spent so little on scientific research/healthcare relative to that spent on wars, weapons, and terrorism sponsorship, that the only logical facesaving response by most nations was to LOCK DOWN. While this did eventually Break The Chain, it also Broke us all economically and psychologically, especially the middle and lower-income populaces. As consumers remained confined to their homes, ONLY essential goods were in demand, that too at inflated prices/in short supply- it literally felt like slipping back into the Dark Ages. Clearly, with no one spending anything, producers were hardest hit, as their business cash flow cycles ground to a halt. Markets got roiled – be it equity, bonds or currency. Doomsdayers (read losers) predicted ARMAGEDDON!
No time to die!
In the heat of this uncertainty and chaos came the James Bonds to the rescue, those who had “No Time To Die”; viz the various Central Banks. Policy response from Central Banks was SALUTORY. Liquidity was the need of the hour, and that is exactly what they did – PUMP IN TRILLIONS of dollars, just like providing oxygen support to a patient in an ICU. With nations across the globe Locked Down, losses hit the world economies, not only due to lack of trade and commerce BUT ALSO due to a grinding halt to travel and leisure. As per the UNCTAD report, the fall of more than 74% in global tourist arrivals caused a loss of USD 2.4 trillion in global GDP and that figure for 2021 is expected to be in the range of USD 1.7 to USD 2.4 trillion again.As per the UNCTAD report, the fall of over 74% in global tourist arrivals caused a loss of $2.4 tn in global GDP and that figure for 2021 is expected to be in the range of $1.7 to $2.4 tn again. Click To Tweet
But every dark cloud has a silver lining!
But the world has seen a WORSE collapse (that too for a longer time period) in global GDP growth in 2008 post the Global Financial Crisis. Mankind is quick to learn from past six Sigma events; an ARMAGEDDON scenario was avoided thanks to the above liquidity pumping. Also, good news followed, viz of vaccines being announced by several leading drug companies. This laid the foundation of a FIGHT BACK which, since then, has only gained momentum across the world. We, however, are NOT COMPLETELY out of the woods and miles to go in this war against the Pandemic, but every step forward is one more small war won.
The glass is always half full!
On the one hand was misery and pain, but on the other hand, there was a significant pool of savings UNSPENT, and lying in savings accounts or sheepishly invested across the world. Humans, locked up in their homes for months, were embroiled in the frustrations of not being able to lead Normal Lives. Just imagine what happens when you compress a spring too hard for too long! Yes, there will be a massive outburst of action. That is exactly what the world has just begun to witness. Just look at the sheer anecdotal data, whether it is tourist data, or sales of automobiles or even box office collections of the latest Bollywood releases. Even the so-called Doomsdayers were shocked to see strong upward revisions to the Global GDP forecasts made in panic when the pandemic broke out, and as we type this article, there is ONLY a Mild hit in Global GDP growth going forward.
THE CONSUMER IS BACK AND BACK WITH A VENGEANCE…we at Ethical Advisers have anticipated this “REVENGE Spend” theme almost 9 months ago. Investors who believe in this high conviction call are merrily invested in our Happy Hours: Cheers to Good Times smallcase pack.
But picture abhi baaki hai mere dost!
As they say, economic cycles “Mature and Evolve”. Having seen the above Revenge Spend theme play out bang in line with our expectations, the Ethical Advisers research team has renewed confidence in predicting not only a continuance of the same and an Extension of this powerful and unique investment theme. We now strongly believe that a significant part of the UNSPENT savings of 2020 will confidently make it to India’s residential real estate space.
- Strong demographics and nuclearisation of families continue to be the long term growth drivers.
- Affordability has increased noticeably – as real estate prices in the past 4-5 yrs have stagnated while average incomes have risen well.
- RERA and allied laws have strengthened the consumers’ position in an otherwise historically builder dominated market
- Quality offerings of residential constructions now match the rising aspirations of the youth (more than 50% of Indians are below the age of 30!)
- Pradhan Mantri schemes for affordable housing/urban infra will continue to boost demand at the middle-income level.
- Work from home is here to stay.
- Interest rates are at comfortably low levels for mortgage finance.
- Banks will trip over each other to lend at affordable rates as asset quality in-home financing is indeed MUCH BETTER than in corporate lending.
We thus conclude that the powerful combination of these above factors will lead to a Strong RESURGENCE in demand for not only new homes but also for home improvements, upgradations and even investment-led demand in the residential real estate segment. As we all know, the trickle-down effect on demand for home-related products MULTIPLIES when the sale of real estate units picks up. We at Ethical Advisers strongly recommend investors to take advantage as EARLY Birds in this theme and take a serious look at our brand new smallcase viz Housing Demand Resurgence Pack. It is an intelligently created portfolio of direct and indirect beneficiaries of a rebound in the residential real estate boom over the next 3 to 5 yrs. This pack includes not only real estate companies, housing finance companies, gas distributors but those manufacturing paint, cement, tile, furnishings, pipes, and so on.
After all, as they say, Life doesn’t stop just because of a tiny germ, but in fact, momentum gets stronger once the World learns to adopt the right precautionary measures to prevent its impact.
Visit ethicaladvisers.smallcase.com or Whatsapp us @9920034991 to learn more.
Invest wisely, wealth creation is imminent!
- Effect of Resurgence on the Housing Market - Jan 31, 2022
- How Well Has the Manufacturing Sector Recovered From the Impact of COVID-19? - Dec 14, 2021
- Dick Mody on Sectors That Could Benefit From Revenge Spending - Nov 29, 2021