Fireworks on St as Diwali-linked stocks jump up to 60%

Consumption linked stocks are gaining momentum amongst investors ahead of Diwali. Shares of companies involved in retail, distilleries, building materials, consumer goods, jewellery, shoes, and apparel have seen sharp spikes of up to 60% in just last two weeks amid the festival preparations for Diwali.

Brokers say with markets awash with liquidity, investors are betting big on people opening their wallets to decorate their homes and offices, shop for clothes and durables and also engage in fun and frolic this Diwali.

Diwali, a major shopping period for families across India, is expected to be financially important for companies even though economic conditions are not picture perfect.

Retail companies, with perceived better growth outlook, have seen a sharp jump in stocks as demand kicked in. In just two weeks, shares of Shoppers Stop (20%), Avenue Supermarts (up 18%), V2 Retail (11%), Trent (8%), Future Retail (6%) have clocked neat gains. Breweries and distilleries also see a pick-up in sales in and around Diwali, even though alcohol is forbidden due to religious reasons. Stocks of GM Breweries (64%), Ravi Kumar Distilleries (36%), Pincon Spirit (28%), Radico Khaitan (18%), Empee Distilleries (10%) and Globus Spirits (9%) have seen brisk buying in past two weeks, pushing up stock levels.

Shopping for apparel is a must for festivals like Diwali. Bhilwara Technical Textiles stock is up 35% in last two weeks. Denim makers like Nandan Denim (27%) and R&B Denims (13%) have seen a smart rise. Shares of Gokaldas Exports, Indian Terrain, Samtex Fashions, and Womens Next have notched up between 10-27% appreciation.

"Indian consumers have a tendency of buying twice or thrice a year and the festive season is the period when Indian consumers tend to prefer making most of their purchases. To capture this demand various brands also launch new collections in the festive season. In September 2017, restocking by dealers has picked up and the upcoming festive season should lead to an uptick in demand for branded apparel players," said ICICI Securities.

The uptick can also be seen in home renovation-linked space, an area that gets considerable attention during Diwali since people deck up houses, apply a fresh coat of paint and often put new tiles. Sanitaryware manufacturer HSIL shares have perked up 15% in less than half a month. Premium tiles design firm NITCO shares are up 11%, vitrified tiles specialist Restile Ceramics is up 36% and processor of natural marbles Oriental Trimex has jumped 45%. Paint manufacturers like Berger have seen a 7% share price uptick. "Home decoration and renovation pick up pace around the second half of the year. This coincides with the festival season," says Anil Rego, CEO, Right Horizons.

Consumers also spend quite a bit on purchasing electronic appliances, white goods, shoes and jewellery. Stocks related to these spaces reflect the buoyancy ahead of Diwali. Mirc Electronics, that owns Onida brand, has seen shares spurt 25% in last two weeks. Lloyd Electric & Engineering Ltd (LEEL) spiked 17%, IFB Industries is up a neat 12%, and Whirlpool jumped 7% in the white goods sector.

In leather and shoes, Sreeleathers shares have shot up by 22%, Allen Cooper brand owner Superhouse by 20% and Bata India by over 13% -- indicating the buzz around festival led buying.

Jewellery stocks like PC Jeweller (17%), Tribhovandas (16%), Thangamayil, Asian Star (both up 23%), and Shukra Diamonds (24%) have got a fresh lease of life ahead of Dhanteras.

Saurabh Gadgil, director, Indian Bullion Jewellers Association, said, “This year’s Diwali outlook seems bullish. The surge in gold pricing has come down and stabilised. Hence, we feel this year demand for gold and gold jewellery will be up 10 to 15% compared to last year. The market sentiment seems positive for both investors and buyers."