Festivals ring in big-time spends

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Auto, paint, housing, media stocks in demand

Festivals ring in big-time spends
With the festival season set to kick in, stock market analysts are picking up early signs of recovery in discretionary spending. They believe investors can safely pick up stocks from select consumer discretionary counters ranging from automobiles to retail, paint, jewellery and media.

The festival season has already started in Kerala. From September, several regional/national festivals will start. Data show car sales are rebounding after months of lacklustre performance. While rural gold demand might peter out due to a weak monsoon, overall jewellery demand could rise ahead of Diwali. The anticipated pickup in the economy is also likely to boost ad spending, generating higher revenues for media companies.

Market watchers believe home sales and consumer goods purchases would show stronger gains on account of better job prospects, higher household incomes and rising optimism about India’s economic prospects. This will further increase demand in the consumer discretionary sector.

Debopam Chaudhuri, chief economist at ZyFin Research, said, “This is the first time since 2012 that we have observed such a sharp increase in sentiment indices. This is encouraging sign since 55 per cent of the Indian real economy is driven by private spending. This should be reflected in actual sales over the next four to six months.”

Dipen Shah, head of research at Kotak Securities, expects automobile and paints sectors to see a revival. He is positive on both sectors.

A recent global study by Nielsen on consumer confidence and spending intentions ranked the confidence of Indian consumers highest among 60 countries in the June quarter. India was at number 2 in its last reading.

“We are selectively positive on the auto space with a bias for four-wheelers and commercial vehicle firms over two-wheeler makers. We are also positive on paint companies on account of recovery in industrial growth and rising demand for higher value decorative paint segment. We believe the recovery in these two sectors would not be V-shaped, rather U-shaped,” said Dipen Shah, head of reasearch at Kotak Securities.

Full report in FC Invest

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