Economy Returning to Normalcy: Jefferies highlights Covid-19 Recovery in India

Covid-19: Jefferies recovery tracker was 99%+ for December, exiting at a 100% rate, indicating that the economy is normalising fast. Sustenance of recovery post the festive season is reassuring. Urban indicators for travel & realty have seen good improvement. Record GST collections align with several broad indicators' strength. No COVID second-wave so far has been a relief. Jefferies maintain their pro-recovery stance on banks, property, materials & industrials.

Activity back to pre-Covid-19 levels:

Jefferies track 20 economic high-frequency (mostly daily/weekly) activity indicators to formulate our India economic activity indicator. December month activities averaged 99%, +1ppt MoM, exiting the month at the highest reading for our tracker at 100%. The Jefferies recovery tracker has risen by 3ppt since a post festive season low in mid-November, indicating growth resilience; Jefferies recovery tracker reading reaffirms their belief in Jefferies Dec' qtr GDP at a small -ve and second half FY21 GDP growth being back in black.

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Urban activity rising but still off peak:

Urban indicators are continuing their climb back, but are still below pre-Covid highs. Congestion levels & workplace mobility reached their best levels since Feb, but are still 15ppt below pre-Covid levels. Domestic flights scheduled reached 65% of pre-Covid-19 by early Jan'21. Domestic air passengers were -50% YoY in Nov'20. Rail long-distance travel bookings are 85% of pre-Covid-19, though suburban rail traffic is lagging at 30%. Credit card payments crossed their pre-Covid levels in the festive October month.

Broader data points strengthen MoM:

The e-way bill generation pace picked up in December (16% for Dec, +8ppt MoM). E-toll collections (+17% in Dec vs. pre-Covid-19 rate), custom collections (37%) and Car/2W registrations (23%/11%) have seen their best readings since Mar'20. Other broad indicators holding up well include railway freight (+9%), electricity consumption (+5%) and petrol consumption (+10% YoY). Diesel consumption has been sluggish at -5%. Domestic demand indicator imports (ex petro, ex Gold) grew 8% YoY in Dec, 26-month high.

Real estate data strengthens:

Property registrations in Mumbai and Delhi surged at +204% YoY/+36% YoY in December. While the former has been helped by a stamp duty cut, Delhi's rise is purely market improvement. Data from property consultants shows primary sales within 10-15% of last year levels.

Covid-19 trend encouraging, vaccine rollout ahead:

Covid-19 cases addition run-rate has declined 48% MoM to an 3.7 month low of 19k/day. Active cases are down 77% from peak. The daily fatality rate stands at 240/day, about a fifth of the peak. The Indian government has approved two vaccines for use against Covid-19, both of which will be manufactured in India. Further Covid-19 decline / fast vaccine roll-out in urban areas should help drive GDP growth towards our 13% estimate for FY22.