Realty, consumer durable sectors outperform, up over 100% in CY17

Contrary to expectations that demonetisation and implementation of the goods and services tax (GST) bill will dent the fortunes of consumer durables sector and realty sectors, both indices have maned to outperform the markets during calendar year 2017 (CY17).

 

While the S&P BSE Consumer Durables index gained 101% during CY17, the S&P BSE Realty index rallied 106% during the same period. By comparison, the S&P BSE Sensex moved up over 28%.

 

Analysts attribute the sharp run-up in the consumer durables space to a normal monsoon, leading to a healthy demand. The real estate sector, on the other hand, benefitted from the focus on government’s focus on the affordable housing sector and policy initiatives like RERA that translated into gains for some of the stocks in this space.

 

Defensive plays such as information technology (IT) and healthcare were the worst performing sectors in CY17. While the sentiment in the IT sector was dented on account of H1-B visa issues and subdued earnings, US FDA related issues and lower-than-expected corporate earnings growth for some kept the overall sentiment under check for companies in the pharma sector.

 

“Consumer Durables we saw a good pent up demand leading to growth in revenues of companies. Good Monsoon, and healthy demand during festive demand kept the sector cheerful,” said Siddharth Khemka, head of retail research at Motilal Oswal.

 

According to Jayant Manglik, president - retail sales at Religare Securities, demand in the real estate sector is expected to gather steam led by softer asset (real estate units / physical asset) prices.

 

“The sector had been under pressure since the last few years on account of the huge unsold inventory and peak prices in many regions. However, some recovery has been seen in recent times on the back of an uptick in demand for commercial properties and rentals in certain metro cities,” Manglik says.

 

For CY18, most analysts place their bets on Auto, Private Banks, Housing/Consumer Finance Companies, Consumer Durables and Building Products (Paints, Ceramics/Tiles, Plywood) sectors. These sectors, analysts say, are likely to see a healthy earnings growth. The IT sector remains a contra play.

 

At the macro level, Khemka of Motilal Oswal expects S&P BSE Sensex and the Nifty50 to deliver around 10% - 15% return in 2018. “The December 2018-end target for Nifty50 is seen at 11,450-11,950 and for the S&P BSE Sensex at 36,950-38,630 levels,” he says.

Indices	Current Value*	% Change
BSE Realty	2608.25	106.36%
BSE Cons Durables	22689.46	101.92%
BSE Basic Metal	3552.56	55.96%
BSE CD & Serv	4487.93	54.37%
BSE Telecom	1675.03	49.47%
BSE Metal	14939.28	47.78%
BSE Finance	5813.73	42.88%
BSE Energy	4208.66	40.21%
BSE Cap Goods	19133.76	40.03%
BSE Bankex	28856.77	39.08%
BSE Industrials	3914.69	38.14%
BSE Oil & Gas	16283.26	34.00%
BSE Auto	26751.2	32.06%
BSE FMCG	10695.18	31.54%
BSE Utilities	2286.61	29.74%
BSE Power	2381.69	19.83%
BSE PSU	9173.3	19.27%
BSE Teck	6408.23	16.55%
BSE IT	11277.81	10.83%
BSE Healthcare	14799.42	0.49%
* As on Dec 29, 2017
Source: AceEquity