Demonetisation punctures consumption stocks

Investors in these stocks have lost nearly ~1.62 lakh crore worth of wealth in the past three days

Investors in consumption stocks have been hit hard by the demonetisation of ~500 and ~1,000 notes.

In the three trading days since the government move, shareholders have lost ~1.62 lakh crore due to the fall in the share price of 101 consumption stocks that are part of the BSE 500 index. Analysts expect more hits for these shareholders and investors, as the liquidity squeeze induced has began to ground wholesale and retail trade, beside the transport sector (see adjoining table).

On the demand side, consumers are either deferring or postponing purchases due to unavailability of new currency notes.

The Delhi-based Indian Foundation of Transport Research Training (IFTRT) claimed on Friday that wholesale markets, small & medium scale units and transport agencies had downed shutters in the National Capital Regional out of fear of tax raids, after Thursday's on jewellers across the country.

“Cargo booking by road transporters and truckers is down by nearly 70 per cent in two days and there is no clarity on when the situation would normalise,” says IFTRT co-ordinator S P Singh.

The analysis is based on 101 companies from the BSE 500 index in twowheelers, passenger cars, building materials, consumer durables, garments, retail & fashion, restaurants and the film exhibition business.

The biggest blow has been on stocks in constructionrelated sectors such as ceramic & tile makers, cement makers and paint manufacturers. Transactions in construction are largely settled in cash and the liquidity squeeze from demonetisation has led to a sharp decline in offtake of building material.

For example, Cera Sanitaryware has lost nearly a fifth of its market value in the past three days. Its market capitalisation was ~3,521 crore on Tuesday and was ~2,863 crore at the end of trading on Friday. Cement maker Century Textile & Industries was down 17 per cent in the period; tile maker Kajaria Ceramics was down 16 per cent.

Non-consumption related stocks were down 1.8 per cent during the period on average, while a typical BSE 500 stock lost three per cent of its market capitalisation. In all, shareholders have lost nearly ~3 lakh crore in combined market capitalisation of BSE 500 stocks.

In absolute terms, automobile makers — Maruti Suzuki, Hero MotoCorp, Mahindra & Mahindra, Eicher Motors, Bajaj Auto -- have been the biggest losers. Followed by fast moving consumer goods majors ITC, Hindustan Unilever and Asian Paints. Then, the cement majors — UltraTech, Shree, Ambuja.