Weekly Sectoral Economic Analysis

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  • Consumer Discretionary and services:

The consumer discretionary is that sector which provides services and goods which are not essential for humans. Basically, these businesses sell those products which are avoidable and may not cause a major consequence if those products were not available, unlike consumer staples such as food, tobacco and beverages. As consumer staples are necessary for individuals, and he/she will buy it at no matter what situation the economy/business line is in.

The main factor of a consumer discretionary company is public confidence, without this the companies in this sector cannot sustain. Other factors which affect these companies are spending power, high wages, decrease in price of others., etc can also affect the business. The demand for these goods and services are more elastic.

The Consumer Discretionary sector comprises companies primarily engaged in.

  • Manufacturing consumer products including durables, leisure products, apparel, and luxury goods.
  • Retail, as distributors, internet and direct marketing retailers, specialty retailers, and multiline retailers such as department stores.
  • Providing consumer services such as restaurants, hotels, resorts, and casinos; and
  • Manufacturing automobiles and automobile components.

DISRUPTIONS CAUSED BY CORONAVIRUS:

Due to this pandemic, the economy has faced a drastic downfall which led to shortage of goods, inflation and unemployment. This has forced the end consumer to spend less money on non-essential things. It has become difficult for consumers to spend money on such things in the times when an individual has lost his/her job. The spending capacity has highly been decreased, which means the cash flow has been broken from one end leading to a disruption in the on-going cycle. The goods produced through non-discretionary goods were even exported earlier, but due to national and local lockdowns the supply chain has also been disturbed. Public entertainment places such as malls, hotels, theatres, airports, etc have been severely affected.

The index value of BSE CDGS went as low as Rs. 2348.82

Currently traded at Rs. 3514.13

Latest news about consumer discretionary:

https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/amazon-sees-discretionary-spending-coming-back-for-festivals/articleshow/78222767.cms

 

  • Textile and Apparel Sector:

Textile Industry is a group of related industries, and each of the industry is significant in a particular way. These industries use a variety of materials which may be natural i.e. cotton, wool, etc. or synthetic fibers for producing fibers. Textile industries contribute to the economy of a country and is considered as an indicator too. It differs from country to country, whether the textile industry operates through large scale or small-scale method, worldwide.

Textile Industry being a group of related industries consists of various types: –

  1. Textiles: Textiles means any filament which can be fiber or yarn that can be made into fabric or cloth. Threads, cords, ropes, lace, embroidery, nets and fabrics made by weaving, knitting, bonding, felting or tufting are textiles.
  2. Textiles – Spinning: Spinning is one of the most important part for production of clothes. Spinning is the process of taking textile fibers and filaments and converting them into yarn. In the earlier periods, yarn was spun from natural fibers to yarn using labor (by hand)
  • Textiles – Apparel: It consists of transformation of the fabrics into clothing and other accessories. The apparel industry consists of cutting fabrics and other materials and sewing them together to create apparel or accessories, including footwear, outerwear, pants, and tops.

DISRUPTION CAUSED BY CORONAVIRUS:

The textile and apparel sector factories have been temporarily been shut down and many laborer’s have been laid off. The import and export of raw materials have been highly affected due to lockdowns. This pandemic has affected majority of India’s exports causing cancellations/deferrals of order leading to inventory build-up and expectation of slower realization of export receivables leading to higher working capital requirements. The garment manufacturers have to look for local sourcing opportunities as the lockdowns have restricted the import and exports. To minimize the impact the Confederation of Indian Textile Industry (CITI) has requested the government to immediately announce a relief package for the textile and apparel sector to mitigate the crisis being faced by the capital and labor-intensive textile Industry, post the corona virus spread.

Latest news about the sector:

https://economictimes.indiatimes.com/industry/cons-products/garments-/-textiles/india-to-organize-worlds-largest-virtual-fair-for-textiles/articleshow/78145963.cms

  • Finance Sector:

The financial sector is made up of companies providing financial services. This sector involves banks, investment companies, insurance companies and real estate firms. India has a diversified financial market which is undergoing rapid expansion, with the entry of several firms and new entities. The financial sector includes banking predominantly which accounts for 64% of the total assets held by the financial sector. The financial sector generates a large revenue through mortgage of loans. The health of an economy depends mainly on the financial sector.

DISRUPTIONS CAUSED BY CORONAVIRUS –

As most of the revenue is generated through mortgage of loans, due to the shut down the borrowing rate has decreased and the amount already borrowed has not been repaid leading to a rise in the NPAs. The effect of coronavirus on the following divisions-

Banking- Banks are struggling to meet their basic working capital requirements, which is their main source of earning. In the lockdown period where the economic activities are on a lower side, borrowings in the form of loans are very low. The government gave a 3-month grace payment option but this method might also lead to a rise in the NPA’s- Non-Performing Assets.

Insurance- Insurers are getting impacted in terms of their assets and liability reflected in the balance sheet. This, as a result, threatens their business continuity as well as future growth. As an impact, insurers can expect to be flooded with general inquiries and claims across multiple different lines, whether that be for health, life or non-life cover

NBFC- Since the Covid-19 sort of impact is unprecedented, it will be very difficult for them to compute the expected credit losses. Many regulators in India and abroad have issued guidance asking the lenders to take a longer-term view rather than a short-term view while computing the provisions. Further, some of the NBFCs give loans to small businesses (micro finance) for which repayments cannot be estimated in this situation as there would be higher losses.

Latest news about the sector:

https://economictimes.indiatimes.com/markets/stocks/news/asian-stocks-fall-on-concerns-about-fresh-lockdowns-banking-sector/articleshow/78246596.cms

 

  • IT Sector:

The IT sector consists of technological based goods and services. The sector consists of businesses consisting of manufacturing electronics, creation software, computers or products and services relating to information technology. IT sector is considered a sub sector of Information and communication sector. It involves computer systems with Hardware, Software, Network, Infrastructure and associated other equipment. Today this also includes, electronics, telecom, internet, semi-conductors and e-commerce and more. BPO’s or call centers are making a big revenue in today’s IT sector. IT is now a part and parcel of every industry even medical, education, food, hospitality is slowly getting actively involved with IT products and tools and services.

DISRUPTIONS CAUSED BY CORONAVIRUS –

The effects of COVID-19 are having a significant impact on the technology sector, affecting raw materials supply, disrupting the electronics value chain, and causing an inflationary risk on products. More positively, the disruption has caused an acceleration of remote working, and a rapid focus on evaluating and de-risking the end-to-end value chain. Due to coronavirus Covid-19 outbreak, players in India’s IT services, according to industry analysts, will see a significant slowdown in growth during this financial year. Indian firms have faced many project cancellations by clients across sectors due to limitations.

The index value of BSE IT went as low as Rs. 10,937.37

Currently traded at Rs. 19,095.

Latest news about the sector:

https://economictimes.indiatimes.com/tech/ites/women-fashion-retail-chain-maurices-hires-tcs-as-technology-partner/articleshow/78296656.cms

ARTICLE BY:

VRIDHI BHAGNARI.

CONTACT DETAILS: [email protected]