Why investors should be wary of the 'Unlock' trade: Let's look at the logic

Consumption growth could be disappointing and stock prices have run up fast

Starting with the third quarter of financial year 2020-21 (Q3FY21), we have seen “unlock” trades at various times. Whenever lockdowns have been eased, traders have taken long positions in consumer-facing businesses. Let’s look at the logic.

Since March 2020, sectors like retail, personal vehicles, hospitality, aviation, fast-moving consumer goods (FMCG), multiplexes, etc., have been under severe pressure. As a result, there’s been a low base effect. Every company in these spaces has suffered top line contraction. Many suffered losses, especially in the first half of FY21.

In Q3FY21, there were hopes of a festive season revival, with the first lockdowns lifted. That