Consumer goods, realty, FMCG worst performers in last six months

Written by fe Bureau | Mumbai | Updated: Jan 21 2014, 18:34pm hrs
Consumer goods'Per capita urban spending has been limited due to inflationary pressures.' (AP)
At a time when consumer spending has taken a hit with investors sceptical of an immediate economic revival, sectoral indices representing sectors like consumer durables, realty and FMCG have been the worst performers on the bourses.

Data show the BSE Consumer Durables Index has declined as much as 11.26% during the last six months when the benchmark Sensex gained 6.11%. Experts attribute the trend to inflationary pressures, though it has only recently shown signs of easing. The wholesale price-index (WPI) inflation fell to 6.16%, at five-month low, in December.

Per capita urban spending has been limited due to inflationary pressures. People refrain from buying luxurious items when primary articles are expensive. However, with inflation softening, this sector can see some greenshoots, said Gaurang Shah, assistant vice-president, Geojit BNP Paribas Financial Services.

The scrip of air-conditioning provider Blue Star has fallen 4.03%, while jewellery maker Titan has seen its stock fall 13.23% in the last six months.

The BSE Realty Index has also shed nearly 9% in the last six months as real estate firms struggle due to lack of demand. We believe investors focus will likely remain on execution given that the demand visibility remains uncertain, said Goldman Sachs analysts Puneet Jain, Aditya Soman and Indrajit Agarwal in a report.

The tough macro environment has started impacting residential absorption in key cities. The first sign of weakness was seen in Q1FY14. While a slowdown in demand is not new news, the pace of decline in Q2FY14 was quite sharp, added Citi Research analysts.

The Godrej Properties stock has fallen 35.4%, Unitech is down 31.83%, while the scrip of Indias largest real estate firm, DLF, has fallen 5.62% over the last six months.

Meanwhile, recent data showed that IIP contracted by 2.1% in November -- lowest in six months -- mainly due to poor performance of the manufacturing sector and lower output of consumer goods, particularly white goods. The consumer goods output declined by 8.7% in November compared to a contraction of 0.3% in the same month in 2012. The consumer durables segment contracted 21.5% in November s against a growth of 1.1%in the same month in 2012. In terms of industries, 10 out of 22 industry groups in the manufacturing sector showed negative growth in November.

Even shares of fast-moving consumer goods (FMCG) are losing their popularity among investors with the BSE FMCG Index dropping 8.51% in the last six months. Rising input costs have been hurting the sector, said Shah. In the first week of January, HSBC survey showed a drop in Indias manufacturing Purchasing Managers Index (PMI) for December. The index showed a reading of 50.7 in December compared with 51.3 in November. Meanwhile, services PMI fell to 46.7 in December from 47.2 reported in November.

Brokerages feel he FMCG sector continues to see subdued volume growth. Initial trends in Q3FY14 indicate a further sluggishness for the FMCG industry. Growth rates have been lower across markets and categories, with slack rural growth as well. We expect volume growth to be lower in Q3 and factor in a 3% volume increase in our estimates for the quarter, said IDFC Institutional Securities in a recent research report.

The Hindustan Unilever have scrip has declined 10.32%, ITC is down 9.8%, while Godrej Consumers is down 13.28% during the last six months.