The surge in equities is being fueled by wealthier India, but there are gaps in the story.

The premiumization of the Indian economy is a hot topic being discussed in the financial world, with many claiming that Indian consumers are buying more expensive products than ever before. Data points reveal a surge in domestic passenger vehicle sales, a significant rise in the sale of luxury homes, and an increase in the number of high-end mobile phone connections. All of this suggests that the Indian economy is heading towards premiumization. However, a deeper look at the data shows a different reality.

While certain segments of the Indian economy are indeed moving towards premiumization, a significant portion of the population continues to struggle. Private consumption expenditure, a major contributor to the Indian economy, is expected to grow at the slowest rate since 2002-03. The demand for entry-level two-wheelers remains low, and the majority of India’s vehicle population still consists of two-wheelers. The number of passengers using the Indian Railways has not yet fully recovered post-pandemic, indicating that the premiumization story may not apply to the entire country.

Data from the Securities and Exchange Board of India shows that 90% of investors lose money while trading options and other derivatives. Additionally, an increase in credit card outstandings and personal loans is a concerning indicator. The surge in UPI transactions and credit card numbers may not fully capture the economic reality of the broader population.

Further, the high demand for work under the Mahatma Gandhi National Rural Employment Guarantee Scheme indicates trouble on the jobs front, and the extension of the scheme providing free food grains to over 813 million beneficiaries highlights the ongoing economic aftershock of the pandemic.

In conclusion, while the premiumization story may have its merits in certain segments of the Indian economy, it does not paint the complete picture. The broader consumption story of the Indian economy presents a different reality, and it is essential to consider both sides of the story before drawing conclusions.

Ultimately, the premiumization story may create opportunities in the stock market, but it is crucial to recognize that the prospects of the broader economy can differ significantly from those of the stock market. It is important to exercise caution and consider the nuances before making investment decisions based solely on the premiumization narrative.