>The rise of the aspirational Indian

In our 1st July note we highlighted that ‘aspirationals’ stocks have outperformed ‘essentials’ on both fundamental and stock price performance over the past decade. Today we highlight that in a high inflation environment in particular, ‘aspirationals’ deliver higher top and bottom line growth than ‘essentials’.

Aspirationals outperform essentials in all ‘GDP growth – inflation’ combinations barring ‘low GDP growth, low inflation’

An 11 year time-series analysis of the ‘aspirational’ vs ‘essential’ product companies’ financials yields the following results (see Table 1 below for a summary):

• In terms of EBIDTA growth, aspirationals outperform essentials under all four macro settings (see Fig 1 and 2 on the right side). In fact aspirational product companies’ EBIDTA expanded at a greater pace (YoY) than that of essentials in 31 of 43 quarters under study (see Fig 3 below).

• In terms of net sales expansion, aspirationals outperform essentials under all but one (low growth, low inflation) setting.

• In a high inflation environment in particular, ‘aspirationals’ deliver higher top and bottom-line growth than ‘essentials’ irrespective of the GDP growth environment.

To read the full report: MACRO OUTLOOK