MOSL: VOICES | INDIA INC ON CALL-Consumption reviving-GST settling down-Commentary turns more optimistic

​VOICES | INDIA INC ON CALL: Consumption reviving; GST settling down; Commentary turns more optimistic; however, private capex revival still sometime away

• 2QFY18 earnings performance and management commentaries indicate tell-tale signs of demand revival, especially in rural consumption. The first quarter post GST implementation came with attendant anomalies, especially in accounting. However, corporate commentaries suggest gradual return of normalcy in trade channels. As GST settles down further, India Inc expects demand trends to strengthen in 2HFY18. 2QFY18 has come as breath of fresh air after many quarters of misses, disappointments and downgrades. Earnings quality has also improved substantially, as discussed in greater detail in our recently released India Strategy.
  
• B2C sectors like Consumer, Retail, Autos, Durables, and Cement benefitted from re-stocking post GST implementation. Early festive season helped too, as inventory filling happened in September in CY17 versus October in CY16 (and hence, captured in 3QFY17 results). Jewelry and Modern Retail were the key beneficiaries of an early festive season.
  
• In BFSI, slippages declined in 2QFY18, though provisioning costs remain high. The sharp divergence in loan growth between Private and PSU Banks continues. Managements across the board have guided significant reduction in slippages, going forward. Given the recent hardening of bond yields, incremental benefits from lower cost of funds seem largely behind. NBFCs delivered another quarter of consistent and broad-based growth, with continued recovery in MFI post demonetization. Competitive intensity continues to inch up in Housing Finance.