📰Luxury

Hello. Indians are buying bigger and better cars, among other new luxuries. We’ll investigate the new middle-class’ spending habits, and close with Gupshup, a round-up of the most important headlines.

Markets

Indian stocks dropped for the sixth time in seven weeks, weighed down by concerns over slowing consumption, weak earnings, and foreign outflows, with the NSE Nifty 50 falling below its 200-day moving average for the first time since April 2023. (Reuters)

Read here for an appendix on the above.

Analysis

How The Growing Middle Class Spends Its Wealth

Indians have been purchasing higher-end consumer products, reflecting a growing trend of wealth accumulation, social status aspirations, and increased access to affordable financing. Total consumer spending is projected to reach $2.43 trillion (₹211 trillion), marking a 25 percent increase since 2021.

A clear example of this shift is seen in the car industry. The number of cars on Indian roads has surged from 19 million in 2012 to 49 million in 2022, reflecting a significant rise in disposable income. Equally notable is the change in who is purchasing these cars; rural buyers now account for over 21 percent of Hyundai's sales, highlighting the spread of wealth beyond urban centers. Additionally, improving infrastructure has played a key role in boosting disposable income across the country. Better roads not only enhance rural connectivity and fuel demand for cars but also support economic growth by enabling more efficient distribution of agricultural goods nationwide.

In the past, consumers typically opted for the most economical choice, with hatchbacks dominating sales. However, recent trends show a significant shift, with Hyundai reporting that 67 percent of its car sales in August were SUVs—larger vehicles that are less fuel-efficient and more challenging to maneuver in traffic. Additionally, Macquarie, an investment bank, found that high-end car variants now account for approximately 43 percent of sales, up from just 27 percent in 2022.

The average consumer spend on cars has risen from $9,107 (₹765,000) in 2019 to $13,690 (₹1,150,000) in 2024. While some of this increase can be attributed to inflation, car manufacturers like Tata have also recognized the growing trend of higher disposable income.

The trend of increased spending extends beyond cars to items like smartphones, where cheaper models are being replaced by higher-end options such as iPhones. In January 2021, iPhones accounted for just 2.7 percent of the market, but by June 2024, this figure had risen to 4.1 percent in a market of 140 million devices annually. Similar to the automotive sector, government policies—such as Apple's increased investment, which allows smartphones to bypass standard import duties—have played a role. At the same time, rising disposable income is fueling the shift, with per capita income at $2,547 (₹214,000) at the start of FY24, expected to grow by 8.9 percent while the savings rate remains around 30 percent.

Consumer financing plays a crucial role in driving increased spending, as it allows people to view purchases as manageable monthly payments rather than large upfront costs. Valued at $35.5 billion (₹2.99 trillion) in 2023, the consumer finance market is expected to grow at a compound annual growth rate (CAGR) of 32 percent over the next decade, fueled by diverse consumer spending demands.

Macro

• India has overtaken China as Asia's top driver of oil demand growth, with consumption set to rise by 300,000 barrels per day this year and next, according to the US Energy Information Administration. Meanwhile, China's oil demand growth has slowed to under 100,000 barrels per day amid an economic downturn and increased electric vehicle adoption. (BBG)

• India's trade deficit surged to $27.1 billion in October, exceeding forecasts of $22 billion, as imports rose 3.9 percent to $66.3 billion while exports grew 17.3 percent to $39.2 billion, driven by festival demand and higher crude oil and gold purchases. (BBG)

• RBI Governor Shaktikanta Das says India's economy remains resilient despite global challenges and maintains a 7.2 percent growth projection for the fiscal year despite economists like Goldman Sachs predicting 6.5 percent. Das emphasized a cautious approach to interest rates, warning that premature cuts could exacerbate inflation risks. (BBG)

• Moody's forecasts India's economy will grow by 7.2 percent in 2024, driven by recovering household consumption and moderating inflation. The firm also predicts steady growth of 6.6 percent in 2025 and 6.5 percent in 2026, with rural spending and festival demand supporting the economy, despite ongoing inflation risks. (BBG)

• India's retail auto sales during this year's festive season rose by 12 percent year-on-year, driven primarily by strong rural demand for two-wheelers, according to data from the dealers' body. (BBG)

Equities

• Indian stocks dropped for the sixth time in seven weeks, weighed down by concerns over slowing consumption, weak earnings, and foreign outflows, with the NSE Nifty 50 falling below its 200-day moving average for the first time since April 2023. (Reuters)

• State Bank of India is set to raise $1.25 billion through its GIFT City branch, marking the largest dollar-denominated loan by an Indian lender this year. The loan, arranged by CTBC Bank, HSBC, and Taipei Fubon Bank, comes as India’s total dollar loan issuance drops 27 percent to $14.2 billion in 2024. (BBG)

Alts

• JioStar, formed from the merger of Reliance Industries' media arm and Disney’s local unit, aims to disrupt India’s $28 billion streaming market by offering budget-friendly options tailored to the country's diverse audience. The platform, reaching 750 million people, seeks to challenge Netflix and Amazon by catering to India’s cost-sensitive consumers, according to Vice Chairman Uday Shankar. (BBG)

• Blackstone is reportedly seeking a 20 percent stake in Haldiram's snacks, valuing the company at $8 billion, after talks for a majority stake sale fell through. (Reuters)

• India’s Adani Group will invest $10 billion in U.S. energy and infrastructure projects, aiming to create 15,000 jobs while strengthening ties between the two nations. This move follows a year of rebuilding after allegations of financial misconduct, with the group securing major investments from global backers. (BBG)

• India’s hopeful alternative to Dubai, GIFT City in Gujarat, continues to grow as JPMorgan Chase launches a derivatives development unit, marking the first such initiative by a global bank. The unit, which plans to hire five staff within a year, will support clients in Asia-Pacific and Europe while complementing JPMorgan’s operations in Hong Kong and London, aligning with efforts to position GIFT City as a global trading hub alongside Singapore and Dubai. (BBG)

Policy

• India’s government has implemented stricter anti-pollution measures in New Delhi, including a ban on non-essential construction and a call for residents to avoid burning coal, as toxic smog disrupts flights and obscures landmarks like the Taj Mahal. (Reuters)

See you Monday.

Disclaimer: This is not financial advice or recommendation for any investment. The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.

1 USD = 84.4 Indian Rupee