Cite better demand, monsoon scenario as well as factor such as business expansion, among others, to be upbeat.
With a third consecutive year of normal monsoon forecast, along with an election year being in focus, the market is likely to have a few consumption-related themes in focus.
Generally, it is believed that a good monsoon will boost demand, both rural and urban, for consumer-facing companies such as FMCG and paints, among others. This holds true especially in case of rural India, where rains are seen as signs of better income, which in turns to better spending power.
The Indian Meteorological Department (IMD) on Monday, in its first-stage forecast, predicted ‘normal’ South-West monsoons (June-September 2018) which could put a lot of agri, FMCG and auto stocks back on investors’ radar. Quantitatively, rainfall activity is likely to be 97 percent of long period average (LPA) as against 95 percent actual rainfall last year, it said.
Market voices are upbeat on this development. Consumption theme is in focus for them for reasons such as better demand, among others.
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“Consumption theme is really emerging. Look at FMCG names. The moves on these stocks are worth taking a note of. They are giving 1-2 percent on a day-to-day basis. One can also look at autos and airlines, among others,” Atul Suri, Chief Investment Officer at Marathon Trends PMS, told CNBC-TV18 in an interview.
Meanwhile, experts like Anita Gandhi believe that the government’s plan to double farmer income and better demand also makes it an interesting bet.
“Outlook for consumer & rural focused stocks also remains positive with robust demand & government’s plan to double farmer’s income by 2022. They are also still attractive as demand is expected to be robust,” Anita Gandhi, Whole Time Director, Arihant Capital Markets told Moneycontrol in an interview earlier.
Market veteran Porinju Veliyath advises investors to look at consumption themes. As they can generate 15-20 percent CAGR in a safe way.
He placed his bets on stocks such as ITC, Tata Global Beverages, Tata Coffee, Indian Hotels, Britannia as well as VA Tech Wabag.
“…Another factor which makes ITC attractive is the company's huge investments in the non-cigarette business. ITC is at an inflection point and investors who want to generate reasonable 15-20 percent CAGR returns for the next five years should enter now,” he said. Further, he also said that he continues to buy Tata Global Beverages.
"Tata Coffee has deep value. Indian Hotels is also looking good and is at an inflection point." According to Veliyath, these three Tata Group companies are changing and N Chandrasekaran, Chairman of Tata Sons, is doing a wonderful job. "Chandrasekaran is focusing on factors such as profitability and growth." He added that these three Tata Group stocks offer safety to minority shareholders.