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Consumption: Structural uptrend intact
What's Buzzing
Companies are expecting festive season sales to be 30-40% higher than their pre-Covid levels aided by higher growth in premium category products.
Context
- BSE Consumer durable index has given a breakout from the falling channel signalling an end of the eight-month corrective phase and resumption of a structural uptrend
- Consumer sentiment is strongest since pre-Covid years as this is the first festive season after complete unlock and life returning to normalcy. This elevated sentiment coupled with normal monsoon for a fourth year is expected to drive demand across urban and rural pockets
- Share prices of consumer durable companies have a well-established negative correlation with industrial metal prices. The recent sharp correction in industrial metal and Brent crude prices are expected to act as a catalyst. In this context, the ratio chart of the sector against LME metals index (composite for industrial metals) is a lead indicator. In the last decade, on two occasions (2017 and 2019), the breakout in ratio led to at least 80% rise in the index from breakout level over the subsequent couple of years. At present, the ratio has already surpassed multi-month highs, indicating the outperformance of the sector in coming quarters
Our Perspective
We expect the consumption theme to gain further traction and outperform over the next couple of quarters amid structural uptrend. Technically, we remain constructive on Asian Paints, Titan Company, Bajaj Finance, Havells, Bajaj Electricals, TTK Prestige, Trent, Bata India, Voltas, Astral, VIP Industries and expect them to relatively outperform in the coming years.
Disclaimer – I ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. I-Sec is acting as a distributor to solicit bond related products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein mentioned are solely for informational and educational purpose.
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