Modi's note ban shaves Rs 1.2 lakh cr off consumer goods' stocks

While FMCG cos lose Rs 99k cr in m-cap, those on Consumer Durables index lose Rs 20,673 cr

Investors of consumer goods stocks have lost Rs 1.2 lakh crore since November 8 — the day the Union government demonetised Rs 500 and Rs 1,000 notes — as stock prices of fast-moving consumer goods and consumer durables firms continue to trade at lower levels. 

The BSE’s fast-moving consumer goods (FMCG) and consumer durables indices, which cover major consumer goods firms, on Wednesday stood 9.8 per cent and 18.4 per cent lower, compared to their pre-demonetisation levels. The two indices have together lost Rs 1.2 lakh crore or 10.6 per cent of their market capitalisation (m-cap), at Rs 10,04,969 crore. While FMCG companies, included in the BSE FMCG index, lost Rs 98,928 crore of their m-cap to Rs 9,13,428 crore since November 8, the m-cap of the BSE Consumer Durables index went down by Rs 20,673 crore, to Rs 91,541 crore in the corresponding period.

Other major sectoral indices which have lost significant shareholder value are the BSE Realty Index (down 13.4 per cent) and BSE Auto index (down 10.3 per cent). Sales of property and automobiles have also been impacted. 

Cigarettes-to-hotels major ITC’s m-cap has been impacted the most. Its investors have lost Rs 34,541 crore, with stock losing 11.1 per cent since demonetisation. ITC had a m-cap of Rs 3.1 lakh crore on November 8, compared with Rs 2.75 lakh crore on Wednesday. 

Hindustan Unilever, the second largest consumer goods firm after ITC, hasn’t declined as much – it is down 6.4 per cent with an m-cap of Rs 1.7 lakh crore. Other companies such as Nestlé, Dabur, Emami and Titan have lost between 10 and 18 per cent of their market value. 

According to analysts, the cash crunch will hurt the October-December quarter and the pain may continue in the next two quarters. “As investors have started to realise that lack of enough liquidity in the market may affect the quarterly sales performances of firms, they have started to revisit their estimates, leading to a fall in stock prices and m-cap,” said Kunj Bansal, chief investment officer at Centrum Wealth Management.

Since demonetisation, sale of FMCG products and consumer durables have been impacted. While it was earlier expected that the cash situation would improve in two-three weeks, liquidity remains tight and withdrawal limits continue to be in place. Most markets have lost sales ranging between 40-70 per cent. As majority of the transactions at the retail level take place in cash, sales numbers for most consumer goods firms would decline in the near term, experts said.

Edelweiss Securities analyst Abneesh Roy says normalcy in stock markets can be expected from February. According to him, other than demonetisation, the interest rate hike by the US Federal Reserve has also led to a correction in the markets of emerging economies, including India. “The recent increase in crude oil prices may have played a role, too,” he said.

Experts say, increased spending by the government through higher allocation of funds in social sector schemes, announcement of sops for consumers like loan waiver and changes in income tax slabs or lower tax rates are currently expected from the coming Budget. This, in turn, may bring back investors confidence in the last two months of the financial year.