Consumption-linked stocks, financials lead gainers pack in 2017

Consumption-focused stocks, along with financials are the leaders in the top gainers in the BSE 500 pack, in the recent rally that drove the market to new highs, hinting at expectations of recovery in demand and economic growth, as impact of demonetisation fades.

A Mint analysis showed that among the top 25 gainers in the BSE 500 pack for the year to date, nine were consumer discretionary and staples, while six were financial stocks.

These stocks have gained between 56.78% and 119.46%. The top gainer in the pack is Future Retail Ltd., which has more than doubled for the year to date.

In the same period, BSE’s benchmark 30-share Sensex has added 11.56%, while BSE 500 index climbed 15.19%. These indices touched recorded all-time highs on 5 April

BSE 500 stocks account for around 92.3% of the total market capitalization on the BSE.

BSE Consumer Durables index, BSE Consumer Discretionary Goods & Services, while BSE FMCG index gained 38.14%, 18.64% and nearly 13% respectively. BSE Finance and BSE Bankex meanwhile, gained 20.30% and 17.71% respectively.

“The consumption-focused and financial stocks were battered post demonetisation. The outlook for the economy is recovering, in turn fuelling a rally for financials. Domestic consumption demand is seen looking up, which is going well for consumption-themed stocks,” said Rakesh Rawal, CEO of private wealth management at Anand Rathi Financial Services Ltd.

In its monetary policy report on Thursday, The Reserve Bank of India said the GVA (gross value added) growth is projected to strengthen to 7.4 % in 2017-18 from 6.7% in 2016-17, with favourable domestic factors expected to drive this acceleration.

“First, the pace of remonetisation will continue to trigger a rebound in discretionary consumer spending. Activity in cashintensive retail trade, hotels and restaurants, transportation and unorganised segments has largely been restored.

The central bank also said that significant improvement in transmission of past policy rate reductions into banks’ lending rates post demonetisation should help encourage both consumption and investment demand of healthy corporations.