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Stocks to bet on to make the most out of the India

Oct 26 2017

By DK Aggarwal (Chairman and MD, SMC Investments and Advisors Ltd.) The festive season that’s around the corner is one of the most important retail spending events in India. If consumers follow up festive season by spending a lot of money and companies show strong numbers, there would be an indication that it is shaping up to be a particularly profitable shopping season. Festive season spending could be considered a leading indicator for the stock market. The last five months of the year – from August to December – usually bring good tidings for consumption-driven companies, as a rise in demand due to festivals boosts bottom lines. Almost all consumption-driven companies are dependent on this period for a significant proportion of their sales and they come out with new models and products to lure buyers and increase sales during this season. Over the years, there has been a steady increase in spending pattern of Indian consumers. Historically, companies from the FMCG, consumer durables and paint industries have logged huge festive demand and rise in margins. The Indian economy is still coming out of the hit following the demonetisation drive. GST implementation also hurt earnings of almost all companies due to lack of clarity about the said tax system. It is expected that earnings should pick up momentum once there is clarity about tax. Eventually, strong fundamentals such as additional disposable income as result of the Seventh Pay Commission payout and one rank one pension (OROP) scheme, subsequent pay revisions at state levels and an anticipated interest rate cut by the Reserve Bank of India are expected to aid demand growth. The festive season leads to a rise in sales and helps earnings growth of companies during the third quarter. The increased sales across industries and verticals are expected to push the Nifty50 higher. A stable rupee and global liquidity will create more room for the Indian stock market to go up. Big FMCG companies, including Parle, Marico, HULBSE -0.57 % and DaburBSE 0.43 % and paint companies such as Berger PaintsBSE -3.02 %, Kansai NerolacBSE -0.99 %, Akzo NobelBSE -0.79 % and Shalimar PaintsBSE -0.36 % have big hopes from the festive season. From the automobile sector, Maruti, Tata MotorsBSE -0.55 % are expected to see demand growth. The consumer durables industry is expected to see modest growth in the festival season, driven by categories such as flat panel TVs and refrigerators. One may look at stocks like WhirlpoolBSE -1.49 %, TVS ElectronicsBSE -2.98 %, VoltasBSE -0.47 %, Havells IndiaBSE 0.60 %, Blue Star and IFB Industries from the consumer durables segment. (The author is Chairman and MD, SMC Investments and Advisors Ltd. Views and recommendations given in this section are his own and do not represent those of ETMarkets.com. Please consult your financial adviser before taking any position in the stock/s mentioned)