7 July 2020
E
CO
S
COPE
The Economy Observer
Global inflation? You got to be kidding!
Disinflationary future is still more real
In 2008, when Global Central Banks (GCBs) expanded their balance sheets, it was seen as a harbinger of imminent
higher inflation. Thus, the 2010s decade was expected to be inflationary. In reality, it turned out to be the most
disinflationary since the 1980s. One layer of analysis explains the divergence – the inflationary fears were unfounded
because expansion in GCBs was not accompanied by broad money supply (called ‘M2’ in the US).
With another round of massive liquidity injection by the US Federal Reserve, the fear of inflation has once again
resurfaced. And this time, since M2 has posted record growth (of ~25% YoY), the 2020s decade is expected to be highly
inflationary. We, nonetheless, beg to differ. One more layer of analysis would again alter the conclusion significantly.
Irrespective of the US Fed’s size, M2 was bound to rise sharply in the current episode because bank deposits (the
primary source of M2, accounting for ~85%) have witnessed truly unprecedented increase post-COVID. The combination
of record growth in personal income and record decline in consumption has boosted deposits.
Credit growth in the US, however, has risen modestly – from an average growth of 6% in the past five years (and ~8%
YoY in 2015-16) to 9.4% in the past four months (and 8% according to the recent reading). The ratio of bank loans to
M2, therefore, has now declined to below 60% for the first time in more than three decades. Further break-up of bank
loans suggest that almost the entire incremental growth is led by ‘commercial and industrial’ loans, while loan growth
to other sectors (including ‘consumer’ and ‘real estate’) has remained largely unchanged v/s pre-COVID growth. Not
surprisingly then, loans to deposit ratio in the US has plunged to 68.8% in Jun’20, the lowest since the 1970s.
Broad money supply growth has picked up in other major economies (the Eurozone, the UK and Japan) as well because
higher personal savings have boosted bank deposits everywhere. However, like in the US, loans to deposit ratio is also
at an all-time low in other major nations.
Going forward, M2 growth in the US is more likely to remain in double-digit (say, 10-12%) by end-2020. This is because
we expect only gradual normalization in consumer spending, and thus, in deposits too, which implies slow recovery as
well. Without commensurate loan growth, inflation will remain at bay. In 2021, three possible scenarios could play out,
only one of which – with least possibility – will be inflationary:
1)
Under the worst-case scenario, US consumers will not increase their spending and maintain personal savings at
high levels (say, 10-15% compared to 7-8% pre-COVID). In such an event, bank deposits would remain high keeping
M2 growth also elevated. Nevertheless, with very weak consumer demand, it is highly unlikely for companies to
borrow and invest, which means that US economic activity will remain extremely subdued. 2021, thus, would not
be very different from 2020 (not our base case). This scenario would actually bring back disinflationary fears.
2)
Most likely, and hopefully, the recent spurt in US personal savings would taper off more speedily over time, as
consumers become more confident of their spending. As deposits growth comes off, it will bring down M2 growth
too. This is the best-possible outcome and the most likely one as well, which is also unlikely to be inflationary.
3)
Under the third and the least probable scenario, the US Fed will attempt to keep M2 growth high (say, 10%) by
replacing the fall in deposits by currency in circulation (CIC), which is the only other source of M2. Since CIC is only
~12% of deposits, the normalization in consumer spending and savings will lead to tapering in deposit growth from
double-digit in 2020 to 3-4% (incorporating base effect also) in 2021 and would also imply growth of 60-70% YoY in
CIC. Not only will this be super-inflationary, it would also confirm the end of Central Banking as we know it.
Overall, the 2008 Global Financial Crisis taught us a very important lesson that the expansion in central banks is not
necessarily inflationary. The current episode will leave us with another very important teaching – even double-digit
growth in M2 may not necessarily be inflationary. What eventually matters is credit growth.
Lastly, we note that there are some other forces – the permanent disruption in globalization and the unending pursuit
of modern monetary theory (MMT) – which may be inflationary in the distant future. However, at present, the Japan-
ification of the global economy is a bigger worry than high-or-hyperinflation.
Nikhil Gupta – Research Analyst
(Nikhil.Gupta@MotilalOswal.com)
Yaswi Agarwal
– Research Analyst
(Yaswi.Agarwal@motilaloswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on
www.motilaloswal.com/Institutional-Equities,
Bloomberg, Thomson Reuters, Factset and S&P Capital.
 Motilal Oswal Financial Services
2010s was expected to be
the inflationary decade.
Nevertheless, it turned out
to be the most
disinflationary since the
1980s.
Lesson learnt in 2008 – expansion in GCBs not necessarily inflationary:
In 2008,
when GCBs comprising the US Federal Reserve (FED), European Central Bank (ECB),
Bank of Japan (BoJ) and People’s Bank of China (PBoC) expanded their balance
sheets, it was seen as a harbinger of imminent higher inflation. The size of GCBs rose
from 17% in 2007 to ~25% of GDP in 2008. It rose gradually but persistently to 38%
of GDP in 2018, peaking to 40% in 1QCY18
(Exhibit 1).
The 2010s decade, thus, was
expected to be inflationary. Nevertheless, it turned out to be the most
disinflationary since the 1980s. Global inflation – measured by consumer price index
(CPI) – averaged 3.6% in the 2010s decade, lower than 4.2% in the first decade of
the 21
st
century
(Exhibit 2).
The disinflation was prominent in both advanced
economies and the developing world. This huge divergence between expectations
and reality was explained by the fact that while GCBs expanded, it was not
transmitted to the broad money supply (‘M2’ in the US). Most of the additional
liquidity pumped in by the GCBs actually stayed within the financial sector – in the
form of excess reserves – and was never transmitted into the real economy.
Exhibit 2:
…however, CPI-inflation in the 2010s decade was
the lowest since the 1980s
(%)
1980s
1990s
2000s
2010s
54.8
36.6
15.8
20.1
4.2
3.6
World
6.5
2.9 2.0
1.5
Advanced
economies
6.8
5.2
Developing
economies
Exhibit 1:
GCBs expanded their balance sheet from 17% of
GDP in 2007 to 38% in 2017…
Global Central Banks (GCBs)
40
(% of GDP)
30
20
10
0
2001 2003 2005 2007 2009 2011 2013 2015 2017 2019
GCBs = FED, ECB, BoJ and PBoC
Source: International Monetary Fund (IMF), CEIC, MOFSL
With another massive expansion by the Fed, inflation fears are back:
With another
round of massive liquidity injection by the US Fed, the fear of inflation has again
resurfaced. During the GFC, the US Fed’s balance sheet increased from USD900b in
Aug’08 to USD2t in Oct’08 and touched USD3t for the first time in Jan’13. In
contrast, the US Fed expanded from USD4t in Feb’20 to USD7t in Jun’20 in the
context of COVID-19
(Exhibit 3 on the following page).
M2 grew ~25% YoY in
Jun’20 – a record growth in
the past six decades.
The lesson learnt in 2008 made market participants look more closely at broad
money supply (M2) to understand the economic implications, rather than the Fed’s
balance sheet. This now leads to the great worry. M2 grew 25% YoY in Jun’20 – a
record growth in the past six decades, for which data is available
(Exhibit 4).
As
against an average growth of 5.5% during the past five years, M2 growth of 25% has
lent voice to the inflation-mongers – the 2020s decade will see the end of the Great
disinflation with inflationary forces soon resurfacing.
7 July 2020
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 Motilal Oswal Financial Services
Exhibit 3:
Yet again, the US Fed has expanded on a larger
scale in 2020…
8,000
6,000
4,000
2,000
US Federal Reserve Balance Sheet (USD b)
Exhibit 4:
…which is also reflected in the record growth in
broad money supply as well
30
20
10
0
M2 growth (% YoY)
0
(10)
Jul-82 Dec-87 May-93 Oct-98 Mar-04 Aug-09 Jan-15 Jun-20
Last data is as of week-ended July 1, 2020
Last data is as of week-ended June 22, 2020
Source: US Federal Reserve, CEIC, MOFSL
We, nonetheless, tend to differ. Just like one layer of analysis in 2008 helped us
realize that the expansion in GCBs is not necessarily inflation, one more layer of
analysis will help us understand,
“Why the recent spurt in broad money supply is not
inflationary?”
In this note, we analyze the details of M2, which alters the conclusion
significantly.
Irrespective of the size of
the US Federal Reserve, M2
was bound to rise sharply in
the current episode
because of spurt in US
personal savings.
New lesson to be learnt – Broad money supply bound to grow sharply, but
definitely not inflationary:
One of the most important features of the current
pandemic-led economic crisis is the sharp growth in broad money supply (M2),
which was totally absent during the 2008 GFC. Irrespective of the size of the US
Federal Reserve (explained below), M2 was bound to rise sharply in the current
episode because bank deposits (led by record growth in personal income and record
decline in consumption) have witnessed a truly unprecedented increase post-
COVID-19.
With national lockdowns across the world and the related disruptions in economic
activities, governments have announced a stream of fiscal support, including direct
unconditional cash transfers to a large section of the society. As discussed in one of
our
recent reports,
the US government’s fiscal stimulus to support its economic
activity is one of the largest in the world. Consequently, while ‘compensation of
employees’ and ‘business income’ have declined in 2020, fiscal transfers have
supported personal disposable income (PDI) in the US to an extent that per capita
real PDI growth was at an all-time high of 13.4% YoY in Apr’20 and the second
highest at 7.7% in May’20
(Exhibit 5 on the following page).
The national lockdowns,
however, did not allow consumers to spend that money. Not surprisingly then, real
personal consumption expenditure (PCE) declined for the past three consecutive
months, posting its worst-ever contraction. As a result of the record-high growth in
PDI and record-high fall in PCE, personal savings jumped from 8% (of PDI) in Jan-
Feb’20 to an all-time peak of 32.2% in Apr’20 before retreating slowly to 23.2% in
May’20
(Exhibit 6).
7 July 2020
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 Motilal Oswal Financial Services
Exhibit 5:
Unprecedented fiscal transfers boosted personal
income in the US massively…
20
10
0
(10)
PDI
(% YoY)
PDI ex fiscal transfers
Exhibit 6:
…however, inability to spend led to the jump in
personal savings like never before
40
30
20
10
14.6
32.2
(6.6)
0
Source: US Bureau of Economic Analysis (BEA), CEIC, MOFSL
Credit is the primary use of
money supply; however,
deposits are the largest
component of M2 (~85%)
and by far, the primary
source of creating broad
money in any nation.
Unprecedented surge in bank deposits drive unprecedented hike in M2…:
As
personal savings rose, so did bank deposits. As against an average growth of <5%
during the past five years, bank deposits grew at an all-time high of 16.4% YoY in
Apr’20, 20.6% in May’20 and touched a new high of 22% in mid-Jun’20
(Exhibit 7).
Now, we all know that credit constitutes broad money supply and is the primary use
of money supply. On the other hand, deposits, by far, are the largest component of
M2 (~85%) and the primary source to create broad money supply in any nation
(Exhibit 8).
In modern times, when GCBs are the major creators of broad money
supply, the role of deposits (or the source of M2) is definitely as important as that of
credit (or the use of M2), or probably more.
CIC, the only other source of M2, has also grown faster – from an average growth of
6% during the past five years to ~13% now. However, this is not particularly
concerning. As a case in point, CIC growth surged from an average of 3.6% between
2004 and Sep’08 to 10% in 1HCY09, but as we now know, it never led to higher
inflation. The growth in CIC (considering it is only ~12% of M2), we believe, has to be
much higher to be inflationary.
Exhibit 7:
M2 growth has been in-line with the surge in bank
deposits in the US…
25
15
5
(5)
Bank deposits
(% YoY)
Currency in circulation
Exhibit 8:
…which accounts for 85% of M2 and the primary
source of broad money supply
100
90
(% of M2)
Bank Deposits
21.3
12.8
80
70
60
Last data is as of week-ended June 24, 2020
Source: US FED, CEIC, MOFSL
7 July 2020
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 Motilal Oswal Financial Services
From an average growth of
6% in the past five years
(and ~8% YoY as recently as
2015-16), credit growth has
improved to ~10% since
Mar’20 and has already
retreated to <9%.
…but credit growth pick-up only marginal relatively…:
Therefore, as we mentioned
earlier, M2 was bound to rise sharply in the current episode led by bank deposits,
irrespective of the size of the US Federal Reserve. Eventually though, the uses and
the sources have to match each other and they add up to the broad money supply.
The sharp surge in M2 – primarily led by bank deposits – would have the tendency
to be inflationary, only if it is complemented by similar spurt in credit growth.
Although deposits are the primary source of M2, credit growth is one of the uses of
M2, which accounted for roughly two-thirds of M2 (down from its peak of 89% in
Oct’08) during the past many years. Banks’ and the Central Bank’s investments in
securities (and net foreign/external assets in case of emerging and developing
economies) are also a part of M2. With deposits leading to the unprecedented surge
in M2, bank credit growth has risen, but is nowhere close to the alarming levels.
From an average growth of 6% in the past five years (and ~8% YoY in 2015-16),
credit growth has improved to ~10% since Mar’20
(Exhibit 9).
Exhibit 10:
…and its share in M2 has fallen below 60% for the
first time in more than three decades
110
90
70
50
30
(% of M2)
Exhibit 9:
Credit growth has picked up but is nowhere close
to ring the inflationary bell…
Banks: Loans & advances (L&A), % YoY
20
10
0
CBs: L&A
(10)
Last data is as of week-ended June 24, 2020
Source: US FED, CEIC, MOFSL
The share of bank credit has
fallen to sub 60% of M2 for
the first time since late
1980s.
This definitely does not worry us to be inflationary because of three particular
reasons: (1) credit growth has already retreated to ~8% in the recent reading for the
week ended 24
th
Jun’20, (2) the share of bank credit has fallen from its all-time peak
of 89% of M2 in 2008, which rose gradually from 35% in late 1950s, to sub 60% for
the first time since the late 1980s
(Exhibit 10),
and (3) details of bank loans suggest
that almost the entire incremental loan growth is very narrowly concentrated on
only one segment of loans, while growth in other segments has actually softened.
…which is highly concentrated on only one segment:
US bank loans are classified
into four segments – commercial and industrial (C&I), real estate, consumer and
others. Although loan growth has picked up from 6% to 10% recently, almost the
entire incremental credit growth is led by the C&I segment, while loan growth to all
other sectors has actually softened in recent months. Loans to the C&I sector form
almost a quarter of all bank loans, which have grown 25-30% YoY in the past few
weeks. Consumer loans have declined for the first time in nine years while real
estate loan growth has actually softened (to 3.5%) compared to the average growth
(of 4.6%) during the past few years
(Exhibit 11-12 on the following page).
C&I loans
may have been driven by the sharp demand for working capital loans to sustain
during this period along with fiscal support.
Commercial and industrial
loans have grown 25-30%
YoY in the past few weeks,
while consumer loans have
declined for the first time in
nine years.
7 July 2020
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 Motilal Oswal Financial Services
Exhibit 11:
Commercial & industrial (C&I) sector has led to
higher loan growth in recent months…
40
20
L&A: Commercial & Industrial (C&I)
L&A: Ex C&I
Exhibit 12:
…while consumer loans have declined for the
first time in 9 years
(% of L&A)
100
L&A: C&I
L&A: Ex C&I
(% YoY)
22.2
75
50
0
(20)
3.5
25
0
Last data is as of week-ended June 24, 2020
Source: US FED, CEIC, MOFSL
In fact, while bank loan growth has picked up from an average of 5.8% during the
past five years to 10%, banks’ investments have posted faster rise in growth from
5.6% to 13%. Consequently, loans have plunged sharply from 65% of M2 in Feb’20
to 58% in mid-Jun’20, the fall in the share of banks’ investments has been lower
from 25% to 23% during the same period.
While bank loan growth has
picked up from an average
of 5.8% during the past five
years to 10%, banks’
investments have posted
faster rise in growth from
5.6% to 13%.
Overall, while M2 has posted record-high growth, it is primarily led by bank
deposits. Bank deposits have risen due to the combination of massive fiscal transfers
leading to record-high growth in personal income in the US and the record decline in
personal consumption forced by national lockdowns in the context of COVID-19. The
rise in deposits is matched partly by slightly higher growth in commercial bank loans,
their investment portfolio and expansion in the Central Bank’s balance sheet, which
– as we learnt a decade ago – need not necessarily be inflationary unless the private
sector turns buoyant to boost overall economic growth.
US story is mirrored in other major economies as well, to a lesser extent though:
Importantly, while the trends seen in the size of other GCBs, broad money supply,
bank loans and deposits in the Eurozone (EZ), the UK and Japan are similar to that in
the US, the extent of these movements are extraordinary in the US because of their
disproportionately massive fiscal support.
Loans-to-deposit ratio is at
all-time (since when data is
available) lowest levels of
89%, 93% and 73% in
May’20 for the EZ, Japan
and the UK, respectively.
Broad money supply measures (M3 in the EZ/Japan and M4 in the UK) have grown
at an annual rate of 9%, 12% and 4% in May’20 in the EZ, the UK and Japan,
respectively, posting decadal-high growth in EZ/UK and two-decade highest growth
in Japan
(Exhibit 13 on the following page).
While one may argue that sharp surge in
M2 growth would be inflation, as the arguments go for the US, the details suggest
that M2 growth is primarily driven by high deposits rather than loans in other
nations as well.
Not surprisingly then, the loans-to-deposit ratio is at all-time (since when data is
available) lowest levels of 89%, 73% and 93% in May’20 for the EZ, Japan and the
UK, respectively
(Exhibit 14).
7 July 2020
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 Motilal Oswal Financial Services
Exhibit 13:
Broad money supply growth pick-up in the EZ/UK
is only modest compared to the US…
Broad money supply (% YoY)
EZ
Japan
15
5
(5)
(15)
UK
Exhibit 14:
…but the loans-to-deposit ratio has fallen and is
the lowest on record for all
Loans-deposit ratio (% )
150
130
110
90
70
EZ
Japan
UK
M3 in EZ and Japan; M4 in the UK
Source: European Central Bank, Bank of England, Bank of Japan,
CEIC, MOFSL
While massive credit guarantees by the government for new/renewed loans to
businesses have been granted across the world, they will largely offset the tepid
growth in other types of loans (such as consumer or real estate), which are not
covered under the guarantees. Moreover, until commercial banks discard their risk
management departments, very strong loan growth amid weak-to-decent economic
recovery is highly unlikely.
3 scenarios could play out in 2021, only one of which – the least possible – will be
inflationary:
M2 growth in the US is likely to remain high (close to double-digit) for the rest of
2020. With deposits being the primary source of M2, the gradual tapering-off in
personal savings led by normalization in consumer spending implies deceleration in
M2 growth. Since households account for 65-75% of all deposits in the country, the
expected fall in the personal savings rate from 23.2% in May’20 to 11-12% by end-
2020 suggests that M2 growth would also taper from the current annual growth
rate of ~25% to 10-12% by the year-end. As explained above, however, such high
M2 growth will not be inflationary because it is unlikely to trickle down to high
credit growth.
Two important indicators to watch are the loans-deposit ratio (LDR) and cash-total
assets ratio in the US. Notwithstanding, the record surge in M2, LDR has declined
to all-time lowest level in Jun’20, plunging below 70% for the first time in almost
the past five decades, for which data is available
(Exhibit 15 on the following page).
Similarly, while the size of commercial banks has expanded sharply, a good chunk
of the massive inflow of (most likely transitory) deposits has been kept as cash,
which has almost doubled from USD1.8t in Feb’20 to USD3t now. Thus, the ratio of
cash-to-total assets of banks has risen from 10% to 15% now
(Exhibit 16).
Record-low LDR and surge
in banks’ cash-total assets
ratio suggest that M2
growth is not inflationary.
The expected fall in
personal savings rate from
23.2% in May’20 to 11-12%
by end-2020 suggests that
M2 growth would also
taper from the current
annual growth rate of ~25%
to 10-12% by the year-end.
Both these ratios suggest that while M2 growth has been unprecedented due to
deposit accretion (the primary source of M2), it has not trickled down to loans.
Further, banks also seem to hold the same view as they have increased their cash
holdings massively. Unless higher M2 growth is translated into commensurate loan
growth, inflationary fears will remain at bay.
7 July 2020
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 Motilal Oswal Financial Services
Exhibit 15:
US banks’ loan-deposit ratio has fallen to the
lowest level in almost five decades…
110
100
90
80
70
60
Loan-deposit ratio (%)
Exhibit 16:
…and cash holding for US commercial banks (CBs)
has also risen sharply
25
20
15
10
5
0
CBs: Cash/Total assets (%)
Last data is as of week-ended June 24, 2020
Source: US FED, CEIC, MOFSL
What about 2021? Although M2 growth is expected to soften to 11-12% by 2020-
end, is it possible that inflation will come back next year? Again, we do not hold
this view. In 2021, there are three possible scenarios which could play out, only
one of which – with the least possibility – will be inflationary:
If US personal savings do
not taper off to pre-COVID
levels over the next 12-24
months, tepid growth
recovery will bring back
disinflationary fears.
1) Under the worst-case scenario, US consumers do not increase their spending
and maintain personal savings at high levels (say, 10-15% compared to 7-8%
pre-COVID). If so, bank deposits would remain high keeping M2 growth also
higher. Nevertheless, with very weak consumer demand, it is highly unlikely for
companies to borrow and invest, which means that US economic activity will
remain extremely subdued. 2021, thus, would not be very different from 2020,
which is not our base case. This scenario would actually bring back
disinflationary fears as GDP growth recovery will be more tepid than expected.
2) Most likely, and hopefully, the recent spurt in US personal savings, which may
remain in double-digit by 2020-end, would continue to taper off to more
normal levels of 7-9% next year, as consumers become more confident about
the economic scenario, and thus, spending. As deposits growth comes off to a
normalized level of 3-4%, it will pull down M2 growth as well. This is the best-
possible outcome and most likely as well, which is definitely not inflationary.
To keep M2 growth intact
at ~10% amid falling
personal savings implies
that currency will have to
grow at 60-70% annual rate.
3) Under the third and least probable scenario, the US Fed – in order to destroy
its own reputation or for some unknown reason – will attempt to keep M2
growth high (say, 10%) by replacing the fall in deposits by CIC, which is the only
other source of M2. Since CIC is only ~12% of deposits, the normalization in
consumer spending and savings – leading to the tapering in deposit growth
from double-digit in 2020 to 3-4% (incorporating base effect also) in 2021 –
would imply growth of 60-70% in CIC to support 10% growth in M2 by 2021-
end. Not only will this be super-inflationary, it would also confirm the end of
Central Banking and its objective to maintain price stability as we know it. Also,
the financial markets will get spooked much before CIC growth reaches that
level. This will make it even more difficult for the US Fed to pursue its newly-
found objective of inflating the economy at such pace.
7 July 2020
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 Motilal Oswal Financial Services
Overall, although the record-high growth of 25% YoY in broad money supply (M2)
in the US in the past few months seems scary, and sits in the textbook definition of
being inflationary, we must understand that it is led by an unprecedented spurt in
personal savings and deposits, which is bound to undo itself over a period of time.
While M2 growth is at an all-time high, loan growth in the US is only slightly higher
than in the past few years (~9% vis-à-vis 6%) and consumer loans have declined for
the first time since 2012. In fact, if personal savings rate do not taper off over the
next 6-12 months to 10-12% and then to pre-COVID level of 7-8% by 2021-end, it
indicates prolonged period of tepid growth in the US, which will bring back
disinflationary/deflationary fears.
Even double-digit growth in
M2 may not necessarily be
inflationary unless
accompanied by
commensurate growth in
loans.
The 2008 Global Financial Crisis taught us a very important lesson that the
expansion in GCBs is not necessarily inflationary. While GCBs expanded their
balance sheet, it never led to stronger loan growth or related spurt in economic
activities. Similarly, the current episode will leave us with another very important
teaching – even double-digit growth in M2 may not necessarily be inflationary
unless accompanied by commensurate growth in loans.
Lastly, although we are confident that the deposits-led high growth in broad money
supply will not be inflationary, there are some other forces at work such as the
permanent disruption in globalization and the unending pursuit of modern
monetary theory (MMT), which may be inflationary in the distant future.
Nevertheless,
at present, the Japan-ification of the global economy looks a more
likely scenario than high-or-hyperinflation.
7 July 2020
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 Motilal Oswal Financial Services
NOTES
7 July 2020
10
 Motilal Oswal Financial Services
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as director/officer, etc. in the subject company in the past 12 months. MOFSL and/or its associates may have received any compensation from the subject company in the past 12 months.
In the past 12 months , MOFSL or any of its associates may have:
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managed or co-managed public offering of securities from subject company of this research report,
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affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report should be aware that MOFSL may
have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific merchant banking, investment banking or
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holdings, It does not consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income
from clients which are not considered in above disclosures. Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only.
While calculating beneficial holdings, It does not consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.).
MOFSL also earns DP income from clients which are not considered in above disclosures.
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This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and may not be
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Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research
analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
Disclosure of Interest Statement
Companies where there is interest
Analyst ownership of the stock
No
A graph of daily closing prices of securities is available at
www.nseindia.com, www.bseindia.com.
Research Analyst views on Subject Company may vary based on Fundamental research and
Technical Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated from MOFSL research activity
and therefore it can have an independent view with regards to subject company for which Research Team have expressed their views.
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This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use
would be contrary to law, regulation or which would subject MOFSL & its group companies to registration or licensing requirements within such jurisdictions.
For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong Securities
and Futures Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst Regulations) 2014 Motilal
Oswal Financial Services Limited(SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of research report in Hong
Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity to which this document relates is
only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these securities, products and services in any jurisdiction
where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not located in Hong Kong & are not conducting Research Analysis in
Hong Kong.
7 July 2020
11
 Motilal Oswal Financial Services
For U.S:
Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state
laws in the United States. In addition MOFSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934
Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by
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defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This document must not be acted on or relied on
by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major institutional investors and will be engaged in
only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and
interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOFSL has entered into a
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The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered
broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading
securities held by a research analyst account.
For Singapore:
In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets services
license and an exempt financial adviser in Singapore,
as per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110)
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Singapore Person must immediately discontinue any use of this Report and inform MOCMSPL.
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The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or
distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for informational purpose
and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report constitutes
investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions
expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific
recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this document should make such investigations as it deems
necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult its
own advisors to determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors. Certain transactions -including those
involving futures, options, another derivative products as well as non-investment grade securities - involve substantial risk and are not suitable for all investors. No representation or warranty,
express or implied, is made as to the accuracy, completeness or fairness of the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this
document is provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior
notice. The Company reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their
directors and the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They
may perform or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities
functions as a separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of
information that is already available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or may not
subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to
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registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in
whose possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm, not its directors, employees, agents or representatives shall
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The person accessing this information specifically agrees to exempt MOFSL or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not
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costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263; Website
www.motilaloswal.com.
CIN No.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad(West), Mumbai- 400 064. Tel No: 022
7188 1000.
Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst: INH000000412. AMFI:
ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579 ;PMS:INP000006712. Motilal Oswal Asset Management Company Ltd. (MOAMC): PMS (Registration
No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.:
INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond,
NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. which is a group company of MOFSL. Private Equity is offered
through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL. Research & Advisory services is backed by proper research. Please read the Risk
Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no assurance or guarantee of the returns. Investment in securities market is subject to market risk,
read all the related documents carefully before investing. Details of Compliance Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.
* MOFSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National Company
Law Tribunal, Mumbai Bench.
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