Consumer discretionary gets a leg up as equity investors chase quality

Earnings multiple of consumer durable firms at 3.5-year high

Equity investors coming to the rescue of India’s consumption demand story have pushed up the valuation of consumer discretionary stocks to their highest in three and half years. This is despite a sharp deterioration in firms’ fundamentals over the latest quarter.

These consumer durable stocks are trading at 24.6x their trailing 12-month profit before tax (PBT) on an average, up from a price-to-earnings (P/E) multiple of 21.7x at the end of June and 20.6x a year ago.

The current valuation is just a notch below the peak of 27.7x the trailing PBT at the end of the December 2017 quarter.

The combined market