Mumbai: Foreign portfolio investors (FPI) are still raising their wagers on the consumption theme, although on the macro level they have trimmed exposure to Indian equities.
FPIs have invested nearly Rs 9,000 crore in consumption-related stocks in the quarter through September, at a time when they sold Rs 19,000 crore of Indian equities.
FPIs raised their stake by 1-6 per cent in companies such as PC Jewellers, Interglobe Aviation, Jubilant Foodworks, Bata India, Varun Beverage, Crompton Greaves Consumers, Manpasand Beverage, PVR and Bajaj Finance in those three months. At the same time, their stake in the BSE 200 companies dropped to 24.5 per cent as of September-end from 24.9 per cent three months earlier. The conviction of FPIs in the theme can be gauged from the fact that most of these stock are trading at 20-50 per cent higher compared with their five-year averages.
There are two key reasons why FPIs are evincing interest in these stocks. First: these companies are based on bottom-up analysis, which means that their revenue models offer growth prospects and have low dependency on general economic environment. For instance, FPIs raised stake by 6.4 per cent in PC Jeweller, which reported 30 per cent revenue growth, led by 17 per cent same store growth, and an improved margin in the September quarter. PC Jeweller’s management is confident of a 30 per cent expansion in the domestic business and 10 per cent growth in exports in the current fiscal year. Jubilant Foodworks’ operating margin expanded 440 basis points in the September quarter, helped by cost control. The management is also confident on its margin expansion theme.
The second reason is that some of these companies are undergoing transition that could translate into higher revenue with low investment. Crompton Greaves Consumers’ premiumization strategy in fans has worked well for the company, with product launches such as the ‘anti-dust’ fan achieving strong market traction and driving market share gains. The company continues to enjoy market leadership with a 27 per cent share in fans.