With the recommendations of the seventh pay commission being approved by the Cabinet on Wednesday, major auto, realty, consumer durables and certain fast moving consumer goods stocks rallied between 1.4% and 8.5%.
According to experts, in the aftermath of Brexit, a boost in consumption demand owing to higher disposable income at the hands of government employees will provide comfort to growth in the economy.
Consumer durables’ makers like Nilkamal, Bajaj Electricals, Crompton Greaves Consumer Electricals gained more than 3.5%. While auto stocks including Maruti Suzuki, Hero MotoCorp and Bajaj Auto surged between 0.7% and 4%.
Housing finance companies and realty stocks also bagged gains for the day between 1.5% and 8%. Among real estate companies, Unitech and DLF close to 8% each and HDIL surged nearly 3%.
Motilal Oswal, CMD, Motilal Oswal Financial Services, believes that just ahead of monsoon, “the 7th pay commission will set the snowball impact in the economy. This is a well expected positive move, this will help achieve GDP growth target quicker. The auto, consumer durables and FMCG sector would see much higher demand. A small concern could be that this could push inflation a bit higher.”
The recommendations will benefit over one crore government employees and pensioners. According to government officials, the cabinet has approved a minimum pay hike of 20% and the maximum hike being 25%.
According to Ranen Banerjee, leader, PWC India, concerns lie on the quantum of additional outgo of Rs 1 lakh crore. “The capital expenditure should not come under threat owing to this. The outgo will also possibly be staggered across FY17 and FY 18 and impending implementation of GST in FY 18 may provide the revenue needed to fund this additional outgo.”