Investors reap rich gains as poll-related consumption stocks

Benchmark index Sensex has gained about 6.8% in 30 days and is above 22,500 level, stocks perceived to benefit from elections have shot up as much as 50% in a month

Stock market seems to have its own favourites when it comes to betting on the polls-related consumption boom this election season and some of them include shares of automakers, liquor firms, telcos and media companies.

With the battle for electoral supremacy picking up a fervent pace, nimble-footed fund managers, high net-worth investors and even some foreign institutions are buying into these "consumption plays" available once every five years alongside LS polls. Not to be left behind, retail investors are also buying these shares to reap polls-related gains, pushing the share prices of many of these companies higher by 10-50% in the past one month.

While the benchmark index Sensex has itself gained about 6.8% in 30 days and is above 22,500 level after hitting record highs for the eighth straight session, stocks perceived to benefit from elections have shot up as much as 50% in a month.

Even as bets on the new government getting a strong mandate are abound in what some say is a sure-shot 'hope rally', experts feel many listed firms are likely to benefit, at least in the short-term, from poll-related spending. This is driving investor interest in these counters, amid rising trading volumes.

"Poll-related spending comes into listed firms through media, automobiles, telecommunications, paper, liquor etc. Investors pick up fundamentally strong shares and hold them to benefit from this sentiment. It can land good gains pretty quick but is risky as well," said Alex Mathews, Head Research, Geojit BNP Paribas.

Makers of automobiles, including two-wheelers, cars, jeeps, SUVs and trucks, are said to benefit from poll managers spending big bucks on mobilising people for rallies. Hero Motocorp, TVS Motor, Maruti Suzuki, Force Motors and Eicher Motors have seen share prices spurting by 10-50% in just a month.

Shares of breweries and distilleries are also witnessing good demand. Political parties as well as individual candidates are known to open their purses for luring voters. Besides tobacco products like cigarettes, distribution of free liquor is rampant in many rural and semi-urban areas in the run-up to actual polling day. Investors seem to be betting on this trend and shares of Empee Distilleries, Globus Spirits and Som Distilleries have outperformed Sensex in the past one month.