BSE CD index grew 3.7 times the GDP

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Devangi G: Mumbai, Mar 30 2011, 00:16 IST

Overall rise in economic activity has distinct impact on market capitalisation of industries and companies. A decade-long comparison by FE of the Indian GDP growth rates with sectoral industrial growth rates finds that a 1% growth in GDP translates into a top line growth of 2.5% growth for metal sector, 2.6% for capital goods, 2% for banks and 1.4% for FMCG companies. Or, in other words, if India’s GDP grows by 8% per annum, sales revenues of metal sector has grown at a faster clip of 20%p.a, or 2.5 times that of the GDP growth rates.

As per the study, sectors of consumer durables (3.7 times),capital goods (2.6 times), metals(2.5 times) showed higher growth in sales for a 1% growth in GDP as compared to sectors of FMCG (1.4 times), Oil (1.5 times) and power (1.7 times). For the sake of the study, period of 2001-2010 was considered during which the Sensex earnings grew 2.8 times that of India's GDP growth rates, which in turn grew 6.7% every year.

Interestingly, consumer durables (CD) industry, which is perceived to be cyclical in nature, has emerged as one of the top performer with the revenue of companies present in the BSE Consumer Durables index having grown 3.7 times the growth in the economy during the period. “Yet, the CD sector has not received its due in terms of investor interest even after performing well in terms of both, revenue and earnings growth largely due to its unorganised nature

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