India's consumer durable stocks have been trading lower over fears that higher cost of borrowing and product prices would hurt demand at a time when companies are grappling with steep input prices.
The BSE consumer durables index has fallen over 11 percent in the last 15 sessions, 12 of which ended in losses.
Since the start of June, Amber Enterprises India has lost 21 percent, Aditya Birla Fashion and Retail 16 percent, Titan Co Ltd 14 percent, Whirlpool Of India Ltd 13 percent, Dixon Technologies 13 percent, Havells India 12 percent, Blue Star 10 percent, Voltas 8.5 percent, Bajaj Electricals 7 percent, and Crompton Greaves Consumer Electricals 5 percent.
Rising interest rates are a key overhang for the consumer durable sector coupled with higher commodity prices, analysts say.
Higher interest rates could deter consumers who depend on unsecured loans for the purchase of such items, they say.
Margin pressure, which was visible in the March quarter earnings, is expected to persist in the June and September quarters as well despite price hikes undertaken by these companies.
Though raw material prices have cooled a bit in the past few weeks, a bigger correction is needed to sustain the margin, analysts say.
The Reserve Bank of India has raised the policy repo rate by 90 basis points since May to stave off persistently high inflation which hit an 18-month high in April.
"Despite recent corrections, commodity prices still remain elevated. There is a fear of US recession which has impacted investor sentiment on all consumption items globally including India.
“On the other hand, higher crude prices and currency depreciation has been adding cost inflation for all the manufacturers, impacting the bottom line of the companies directly" Mitul Shah, Head of Research at Reliance Securities, said.
Recent reports of large price hikes by consumer firms to offset the surge in commodity inflation will likely reduce demand, experts say.
"The companies are examining the situation and will undertake calibrated price hikes to mitigate the inflationary pressure, which is expected to impact the overall demand in an already sluggish scenario" said Vinit Bolinjkar, Head of Research, Ventura Securities.
Chandan Taparia, Vice President, Equity Derivatives and Technical, Broking & Distribution, Motilal Oswal Financial Services, expects the consumer durables index likely to correct 5-7 percent more, given the recent price pattern and weak chart setup.
"Inflation has peaked and demand-pull back will cause inflation to soften. However, with the expectation of good monsoon and consequent rural recovery, we expect consumer demand to pick up with a quarter's lag", Bolinjkar said.Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.