Weekly Sectoral Economic Analysis

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Due to the widespread of Covid-19 in the world, many businesses, industries and sectors have witnessed a down-fall. In order to understand how and how badly they are affected, please continue reading below.

(Current prices are the closing prices of as on 15th September.)

  • METAL SECTOR:

The metals and mining sector has been in the forefront of a nation’s economy and India is no exception. For a country’s development, both ferrous and non-ferrous metals are equally important. This also in turn helps to build up a country’s future. There are 2 types of metals- Ferrous and Non-ferrous.

FERROUS METALS:

Ferrous metals mean a compound which contains iron as one of its ingredients. The iron can be is an oxidation state. Outside chemistry, “ferrous” means generally “containing iron”, it is derived from the Latin word Ferrum. Ferrous metals have a high carbon content which makes it almost impossible to rust, except for some few exceptions.

Example- Alloy steel, carbon steel, cast iron and wrought iron.

NON-FERROUS METALS:

Non-ferrous metals mean a compound which does not include iron (ferrite) in appreciable amounts. Non-ferrous metals are found in the Earth as chemical compounds. The most important metals happen to be oxides or sulphides. One of the more common groups of non-ferrous materials is copper-based alloys such as bronze and brass. While it is common to use brass and bronze interchangeably, there is a difference.

Example- aluminum, copper, tin, zinc, etc.

DISRUPTIONS CAUSED BY CORONAVIRUS –

The effect of coronavirus has been clearly visible on the economic condition and the metal industry has reached at an uncertain point. For precautionary causes, trade fairs have been postponed, large groups have been limited to certain number of people and office jobs have turned into work from home jobs. The commodity markets have been affected by coronavirus in many ways. Even though there has been a low demand of commodities like copper, iron ore and zinc, Gold has been increasing rapidly as according to the people in India gold is considered as a safe heaven. In the near future it is expected that as China has been resolving the crisis for its own countries and imports and exports might begin, a rise in the price of these commodities are expected in the coming quarters.

The index value of S&P BSE METALS went down to Rs. 5335.05

Currently traded at Rs. 8725.32

Latest news about the sector:

https://economictimes.indiatimes.com/markets/stocks/news/indias-metal-sector-severely-hit-by-covid-19-to-see-slow-recovery-report/articleshow/77931824.cms

 

  • CAPITAL GOODS SECTOR:

The capital good sector is also called the Industrial sector. This sector includes a category of stocks which are related to the manufacture or distribution of goods. The companies which are involved in manufacturing machinery which are used for capital goods, electrical equipment’s, aerospace and defence, engineering and construction projects. These are basically physical assets that a company uses in the production process to manufacture products and services which will in turn be provided to the direct customers. Capital goods are not finished goods, instead they are used to produce finished goods. These are tangible in nature. Capital goods are depreciative in nature, and has a course to serve life-time or till the machine is completely worn and torn- whichever comes sooner.

Capital goods are not necessarily fixed assets. Core capital goods are a class of capital goods that includes good produced for the Defense department- such as automatic rifles and military uniforms.

DISRUPTIONS CAUSED BY CORONAVIRUS –

The companies producing capital goods have been facing a drastic downtrend and believes to see it disrupting the entire capital goods sector till FY21. The companies have yet been assessing their earnings. According to one of the analysts at Emkay Research, “Most companies highlighted deteriorating macroeconomic trends and strained government finances, affecting order outlook, execution challenges and working capital stress emanating from a tightened liquidity situation.” It is believed that the capital goods sector will show some positive sides once the lockdowns are relaxed. In the current times when nation lockdowns are being held, the main concern of the government is to provide basic necessities, production houses, constructions, textile industries, etc have come to a standstill thus there is supply but no demand and has now become a recession in this sector.

The index value of S&P BSE CAPITAL GOODS went as low as Rs. 9499.15

Currently trending at Rs. 14051

Latest news about the sector:

https://economictimes.indiatimes.com/industry/indl-goods/svs/engineering/bhel-sets-up-make-in-india-mii-business-development-group/articleshow/77930873.cms

 

  • ENERGY SECTOR:

The energy sector is a category of stocks that relate to producing or supplying energy. The energy sector involves exploration and development of oil or gas reserves, oil or gas drilling and refining. The sector involves renewable coal and energy which are provided by integrated power utility companies. The energy sector is divided into 2 parts-

RENEWABLE ENERGY-

The energy which is collected from natural means by humans such as sunlight, winds, rain, tides, etc are the sources renewable in nature.

Example: Hydropower, Biofuels, Wind power, solar power.

NON-RENEWABLE ENERGY-

These are those sources which cannot be humanly reproduced. They are limited and exhaustive in nature. Once it becomes a rare there is no possibility of ever having it in many lifetimes.

Examples: Petroleum products and oil, natural gas, gasoline, diesel, heating oil, nuclear.

DISRUPTIONS CAUSED BY CORONAVIRUS –

The power sector has to be affected drastically but, according to an energy industry body- Independent Commodity Intelligence Services, nuclear power availability in the EU is expected to remain consistent as many countries including the UK and Germany have put safety measures to guarantee the continuation of operations. The disruptions have also caused a fall in demand which has dropped from 100mn BOPD to 73mn BOPD in April. Due to lack of storage facilities and pipeline transmissions capacity, it has forced various energy suppliers to sell oil and gas at a negative price. The oil and energy prices were hit due to an increase in production by OPEC+ lead by Saudi Aramco and rapid fall of demand due to the pandemic.

The index value of S&P BSE ENERGY went as low as Rs. 3011.34

Currently trending at Rs.6674.

Latest news about the sector:

https://energy.economictimes.indiatimes.com/news/power/hydro-power-requires-100-bn-investment-annually-roger-gill-international-hydropower-association/78131561

 

  • FMCG SECTOR:

The fast-moving consumer goods sector is the 4th largest sector of the Indian economy. The sector consists of high turnover consumer packaged goods i.e. goods that are produced, distributed, marketed and consumed within a short span of time. The FMCG sector also includes pharmaceuticals, consumer electronics, soft drinks packaged food products and chocolates. This sector is divided into the geographical regions of India namely urban and rural. The urban area contributes and purchases/uses 60% of the consumption revenue, whereas the rural area contributes the remaining 40%. The retail market of India is estimated at US$ 1.1 trillion. The government allows 100% Foreign Direct Investment in food processing and single-brand retail and 51% in multi-brand retail. With the spur of demand and development of the rural areas and the growth of the market has attracted various investors. The future of the FMCG sector in India looks good.

Some of the top FMCG companies are Dabur (60%), Colgate (54.7%), Hindustan Unilever (54%)

DISRUPTIONS CAUSED BY CORONAVIRUS –

Once the lockdowns were declared a fear arose among the common public and thus heavy buying of all products began, which led to an increase in demand. This led to then shortage of goods, as it had become difficult to supply goods on a daily basis. It is believed that the FMCG sector will be showing a flat growth in 2020. In April the sector’s growth had been slashed of up to 5-6%. In June once the unlock began the sale of FMCG sector increased but overall slipped down to negative 6%. The sector had already been showing a slowdown for 15-18 months, and once covid-19 hit India, the players began offering various price cuts and lesser prices to attract customers. Even due to the slowdown, coronavirus has helped this sector surge the demand up. It has also helped people order more essentials online.

The index value of BSE FMCG went as low as Rs. 8491.04

Currently trending at Rs. 11380.33

Latest news about the sector:

https://economictimes.indiatimes.com/industry/services/retail/reliances-acquisition-of-future-group-to-strengthen-its-retail-footprint-moodys/articleshow/77889050.cms

NEWS REPORTED BY:

VRIDHI BHAGNARI.

CONTACT DETAILS: [email protected]