Consumption scrips steal show as Sensex hits 38K
City: 
Buying spreads to mid-caps/small caps, Rural market buoyant with higher MSP, Nifty seen touching 12K before ‘19 polls

The equity market’s benchmark index Sensex on Thursday set a new milestone by crossing the 38,000-point mark on hectic buying by foreign portfolio investors (FPIs).

While bank and metal counters witnessed frenetic purchase, it was India’s consumption story during the last one year that is stealing the limelight.

The barometer settled the day at a new lifetime closing high of 38,024.37 with gain 136.81 points. NSE Nifty 50 closed at 11,470.70. The broader market also joined the party with BSE mid-cap index gaining 0.59 per cent, led by a rally in the PSU banks. BSE small cap index ended the day 0.29 per cent higher.

FPIs were net buyer of equity worth Rs 916.93 crore on Wednesday and Rs 370.68 crore on Thursday, while the domestic institutions booked profits, as per the provisional data.

The best consumption stocks have given bumper returns of 20-94 per cent during the last one year, while the Sensex has gained 19.58 per cent during the same period, according to an analysis of 10 large cap stocks with consumption theme. The blockbuster consumption scrips included Sensex constituents and those which aren’t part of the index. Hindustan Unilever gained 48.13 per cent, Britannia Industries 56.05 per cent, Dabur India 43.28 per cent, Nestle India 61.77 per cent, Page Industries 94.21 per cent, Titan Company 47.78 per cent, Maruti Suzuki 19.39 per cent, Mahindra & Mahindra 41.33 per cent, Asian Paints 22.51 per cent, Avenue Supermarts 81.37 per cent.

“Consumption is the theme that will play out in near future with the buying potential of India’s population improving and that is why Nifty could touch 12,000 before the forthcoming general elections,” said Kishore P Ostwal, chairman and managing director, CNI Research. The GST rate reduction is a new trigger, soon you will see mid-cap and small cap stocks also rallying, he added.

With the rise in the minimum support price (MSP) for the crops, the rural markets are likely to be buoyant, a perfect setting for the consumption theme.

Hemang Jani, head, advisory, Sharekhan by BNP Paribas, said, “On the Indian markets front, we continue to maintain a positive stance on the market. We feel initiatives taken by the government with regards to Make in India, infrastructure development, financial inclusion of the masses and MSP will have a positive impact on the economy.”
“However, in the short-term key concerns with regards to trade and currency wars, coupled with US sanctions on Iran, have kept equity investors on the edge,” Jani said.

Morgan Stanley in a report on Indian economy said, “Consumption growth remains the key driver, while exports growth has improved in the (April-June) quarter and expected further pick up in growth in the second quarter.”

“We believe that the growth recovery will remain robust, supported initially by consumption and exports before the recovery broadens out to include private capital spending. In aggregate, we expect GDP growth to pick up to 7.5 per cent in F2019 vs 6.7 per cent in F2018,” said Derrick Y Kam and Avni Jain, analysts, Morgan Stanley.