2 weeks Ago
Gautam Duggad , Head Of Research, Director - Institutional Equities, Motilal Oswal , says in consumption stocks , they are down from big overweight to neutral. They are more positive on IT, private banks, real estate and industrials, where they have increased weight. They used to be significantly overweight on consumer discretionary in our model portfolio for the last three years.
But even there, they have cut some weights. They used to hold 11 consumption stocks, out of which 9 were discretionary till July. Now, that is down to 6 or 7.
On the other hand, in private banks, they are overweight after two years and Tech, they have gone overweight in July. In October, they made it even bigger overweight. What about the underperforming pockets.
Pretty much all of consumption has been subpar, as per Street anticipation. Do you think much of the pain is in the price, especially for some of the paint and FMCG categories and do they now become attractive buys or is the pain going to linger on for the next few quarters? Gautam Duggad: Consumption is a very broad ocean now. It is no longer just FMCG.
You have at least 10 sub-categories in discretion apart from staples. Staples have clearly slowed down and the signs were visible even a few quarters back when we were seeing urban growth coming off. Today, we are in a situation where as per the Nielsen or some other syndicate data which has come out a couple of days back, the urban growth has come down with just 2.
8% at a very top-down industry level, which was 11% a year back. Rural demand is recovering after two, two-and-a-half years. Some of it is in the price.
But to expect that there is going to be a very sharp recovery in consumer sector volume growth will not be corrected in my view because the wage growth, the other internals, because if capex has slowed down in terms of the overall government spending, the trickle-down effect of that reflecting in consumption is also going to manifest with a quarter or two of lag. Secondly, none of the companies which have reported so far have very emphatically said in their conference call that the third quarter is looking extremely strong or October looking extremely strong, that is not a commentary that we got. Most of the companies are saying that things are picking up segment to segment, geography to geography.
This pain can linger on for a couple of more quarters and a lot more needs to be done not just at the sector or company level, but I would say even at government level to revive the consumption. Now, within that, we will still look at lots of bottoms-up opportunities. Jewellery is a segment that we like, so we have been holding Titan, Kalyan in our model portfolio for some time now.
Hotels are a very strong sector, I would think. We have been holding Indian Hotels from 100, they posted a very good quarter. And I think the upcycle in hotel, we still have two-three more years of cycle left there, because they have gone through 10 years of a down cycle and we are just in the third or fourth year of an upcycle.
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There are a lot of sub-segments. We like the food delivery segment, stocks like Zomato but we are not positive on QSR stocks. In consumption, one has to take a very bottoms-up, sector-specific, company-specific view rather than painting it with a very broad brush because you will make mistakes in that.
Because staples is something which is clearly very subpar right now and it is going to take time in my view. Other than Zomato and your thoughts on FMCG, tell us about your top 5 to 10 holdings or recommendations within the entire consumption basket. Gautam Duggad: I will just put it differently.
We have been significantly overweight on consumer discretionary in our model portfolio for the last three years now. Staples have been an underweight; in fact except Hindustan Lever, we still do not have any other consumer staple name in our model portfolio. But our portfolio is full of discretionary names like Titan, Zomato, Indian Hotels, Metro, and Cello.
Those are the names that we have been holding. Even there, we have cut some weights. For example, in discretionary stocks also, we used to hold around 11 consumption stocks, out of which 9 were discretionary till July.
Now, we have brought it down to 6 or 7. In consumption, we are down from big overweight to neutral. We are more positive on IT, private banks, real estate and industrials, which is where we have increased our weight.
In fact, in private banks, we are overweight after two years in our October preview. We made Tech, which we were underweight till April, overweight in July. In October, we made it even bigger overweight.
So, in tech, our weight has doubled in the last six months. We are not necessarily very positive across the board on consumption. It is in select pockets and discretionary stocks that our preferences lie.
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