FIIs snap up consumer durables stocks in Feb
The $1 bn figure is the highest FII buying in the sector since Jan 2020
Consumer durables stocks seem to be the flavour of the season. Surpassing all other sectors, foreign institutional investors (FIIs) poured a staggering net $1.042 billion into the sector’s stocks in February 2024, according to data from National Securities Depository Limited (NSDL).
This figure also marks the highest influx of FII buying in the sector since January 2020. FIIs had net sold $27 million worth of consumer durables stocks in January 2020. Despite the lacklustre corporate commentary following the December quarter earnings (Q3FY24), FIIs have lapped up stocks of consumer durables companies.
FII interest was evident from their acquisition of stakes in Whirlpool of India Ltd and Eureka Forbes Ltd through block deals that took place in February.
Nirransh Jain, India analyst for consumer durables at BNP Paribas, explained that the sector had been grappling with several challenges in the past couple of years. These included an inflationled slowdown in discretionary demand, increased costs of commodities, energy rating implementation and heightened competition.
These factors contributed to companies experiencing multi-year low margins and subsequent de-rating of stock valuations, he said.
“We see a renewed interest in this sector now,” Jain added. The fact that the consumer durables sector has the potential to generate multi-year double digit revenue growth is comforting, he said.
Even domestic institutional investors (DIIs) are willing to increase stakes in select pockets of consumer durables, according to Nirav Karkera, head of research, Fisdom. Data compiled by Fisdom Research shows a 7.5% month-onmonth increase in mutual fund ownership in the sector, he said.
Looking at Q3, overall demand in the sector remained weak as consumer spending stayed low. The festive season fell short of expectations, resulting in subdued sales. However, room air conditioner (AC) sales were healthy, driven by channel filling in anticipation of the upcoming summer season. Product categories experiencing healthy growth included cable and wires, as well as ACs. In FY24, the AC industry is projected to grow by 10-15%, while Blue Star Ltd is targeting a 20% rise, contingent upon robust demand during the peak summer months, the Mumbai-based home appliances company said in its recent earnings call.
Categories such as fans, consumer lighting, kitchen appliances, small domestic appliances, refrigerators and washing machines either showed flat growth or experienced a decline.
Some investors are banking on a resurgence in demand to act as a catalyst for growth in the consumer durables sector.
In its recent earnings call, V-Guard Industries Ltd said that even as consumer demand remained subdued in Q3, there are indications of demand revival along with anticipation of a better summer.
Bajaj Electricals, too, highlighted that the sales trend in January 2024 mirrored that of Q3, but it anticipates an uptick in demand during February and March.
Looking forward, it is believed that a rebound in consumer demand, particularly during the summer months, coupled with an increased real estate activity will drive healthy sales for the sector, along with some normalization in margins.
mn Net sale by FIIs of consumer durables stocks in Jan 2020