Domestic liquidity has been the biggest driver of stock prices, and rising inflows through systematic investment plans (SIPs) month after month has created a perception that this is something of a bulletproof shield for the stock market. And yet, there are threats to the rising tide of this money flow. According to data by the All India IT & ITeS Employees' Union (AIITEU), around 20,000 techies lost their jobs in ‘silent’ layoffs in the IT/ITeS sector in India in 2023, write my colleagues Debangana Ghosh and Reshab Shaw. These layoffs happened across IT services companies of all sizes, and there is reason to believe that the numbers are much higher than what has been reported. This is a cause for concern because the IT sector is one of the biggest employers in the country and its health has a bearing on other sectors as well, notably real estate and auto.  At the moment, the problem for the IT sector is cyclical. Demand has slowed down and so companies require fewer hands. But there are structural forces at work as well: Artificial Intelligence. Many IT experts have warned that there could be a wave of layoffs coming in the sector as companies will be increasingly able to do more with fewer people.

And the problem does not seem to be restricted to the IT sector alone.

In its report a couple of weeks back, broking firm Ambit flagged the rising unemployment among youth as a major threat to the India story.

According to Ambit analysts Sumit Shekhar and Eashaan Nair, a high level of youth unemployment has several implications, including i) an ever-expanding need for the welfare state and ii) rising inequality that is delaying the premiumization of consumption.

From the report:

“As a huge population sits out of the labor force depending on government schemes and income of other household members, this affects potential discretionary consumption.”

Shekhar and Nair warn that rising inequality in income levels cannot be ignored.

“In India, the top 1 ?count for more than a fifth of national income. As income inequality rises, it would be a major headwind to sustainable economic growth. This has led to a situation where too few account for a large share of overall consumption.”

Nalco (Rs 191.80, -1.3%)

Shares fell despite strong Q4 earnings

Bull argument: Operating margins improved on efficiency measures. Aluminium prices have been steady and the demand outlook is strong, because of the shift to clean energy. Many analysts have raised earnings estimates for the company.

Bear argument: Revenue from the aluminum business and the chemical business declined during the quarter.

DOMS Industries (Rs 1907, 3.1%)

Revenue rose 20 percent year-on-year (YoY) to Rs 403 crore in Q4FY24.

Bull argument: Leader in 'stationery and arts’ products industry. Has a high brand recall. The company has done further capacity addition to improve manufacturing capabilities.

Bear's argument: Valuations are expensive as compared to peers in the same industry.