Durables stocks a big hit in August

The Bombay Stock Exchange (BSE) consumer durables sector index has outperformed all other sectoral indices in August by a huge margin.

The consumer durables index has gained almost 15 per cent while the benchmark BSE Sensex managed to end just 0.42 per cent higher from 5170.32 on July 30 to 5192.08 on August 31.

Markets sources said action was now concentrated in valuation-driven specific sector stories, even though the broader market had remained rangebound in the last few weeks. In terms of sectoral indices, the BSE capital goods index was a distant second with 7 per cent gains in August, followed by the BSE IT index with 2.78 per cent gains.

The BSE Bankex index was the only sectoral index to have reported losses in August, closing 0.12 per cent lower while even the FMCG index was up 0.33 per cent.

Nilesh Shah, executive director (equity strategy) at Kotak Securities, said, "A strong economy and positive consumer sentiment has led to a strong demand for consumer durables and this is reflected in the capital market."

He added that most consumer durables companies were in the mid-cap segment which was the centre of hectic buying activity in August.

Gurunath Mudlapur, head of research at Khandwala Securities, said, "This sector had a number of low valuation companies, and mid-caps have attracted good buying attention in the last few weeks."

He added that the new government's focus on rural development had boosted the sentiment for these companies on the bourses as the rural market was a big market for them.

Some of the top companies in the BSE consumer durables index saw hectic activity in August. In the period between July 30 and August 31, the Titan Industries scrip surged 32.82 per cent to Rs 146.90, Videocon International gained 26.25 per cent to Rs 50.55, Samtel Color was up 17.75 per cent to Rs 60.70, Blue Star was up 9.51 per cent to Rs 192.85 but MIRC Electronics fell 9.30 per cent to Rs 19.50.

Market sources attribute the huge disparity between the performance of different sectoral indices to investor perception and to the fact that some heavyweight scrips in the indices saw value buying.