Amid the intense selling pressure in domestic equity markets, the consumer durables index suffered the worst of the wrath of investors, tumbling about 9 per cent.
The index is quite sensitive to interest rates, which were surprisingly hiked 40 basis points by the RBI governor in the last week, hurting the investor sentiments.
If the interest rates increase, consumers spend less on discretionary items as the money becomes dearer and this is what is hiking consumer durable counters.
Sumeet Bagadia, Executive Director, Choice Broking, said that the consumer durable sector disappointed investors with recent performance as it’s considered one of the safest sectors, along with fast-moving consumer goods.
The market witnessed the worst sell-off as the Nifty consumer durable index tumbled from 27,886.65 to 25,372.20 or 9 per cent in the last week, he added.
“The next support remains at the level of 24,500, suggesting sustaining at these levels might come up with buying opportunities for short to medium term,” said Bagadia.
Among its major constituents, Titan, which holds a weightage of almost 38 per cent in the index, ruthlessly underperformed, followed by Havells and Voltas, the data suggests.
Voltas tanked about 19 per cent in the last week, followed by a 10 per cent drop in the Titan Company. Also, Havells plunged 6 per cent in the week gone by.
Aditya Suresh, Head of Research & Strategy – India, Macquarie, believes that ‘discretionary’ spending in the overall consumer wallet could inflect from 24 per cent to around 40 per cent by FY30, in absolute terms.
“It would imply over four-fold growth,” he added. “The aforementioned theme, combined with ongoing market share gains, leaves us selectively constructive on names such as Titan, for example.”
Additionally, brokerage firm ICICI Direct Research has a ‘buy’ rating on the counter, with a target of Rs 2,727. “We continue to remain structurally positive on the stock as high growth visibility justifies premium valuations,” it added.
The Nifty Consumer Durables Index, which reflects the performance of consumer durables stocks, comprises a maximum of 15 stocks listed on the National Stock Exchange (NSE).
Voltas has managed to grow despite a high base. Its market share has been stagnant at around 25-26 per cent, indicating intense competition in the RAC segment, said YES Securities in its brokerage with a ‘reduce’ rating and a target of Rs 1,190.
“Although we structurally remain positive on the stock, rich valuations and challenges in further RAC share gains might limit near-term upside from current levels,” it added.
Phillip Capital has upgraded Havells to ‘buy’ rating with a target price of Rs 1,385 apiece.
“We value Havells on FY24 earnings and maintain a premium valuation of 50x based on its strong brand, distribution, in-house manufacturing, market share gain, balance sheet, and cash flow, which will help it ride out the tough environment,” it added.
Other index constituents include TTK Prestige, Whirlpool, Dixon Technologies, Relaxo Footwears, Havells India, Blue Star, VGuard Industries and Amber Enterprises.
Bagadia from Choice Broking is bullish on Amber Enterprises for short to medium term as the stock remains in a bullish trend. He has given it a target price of Rs 4,050, a potential upmove of 9 per cent on the counter with a stop loss at Rs 3,520.
“Stock is trading above 50 DMA as well as 200 DMA suggest decent potential remains for upside movement. Indicators such as RSI and MACD are on the positive side. Price has support of the middle Bollinger band as well in daily charts,” he adds. Techilive