Moneycontrol Bureau
Be prepared. India is likely to see positive confidence shock with consumer discretionary and retail financiers to be benefitting the most. According to Abhay Laijawala of Deutsche Bank Multiple 7th Pay Commission, good monsoon, low interest rates and easing liquidity should provide a significant boost to aggregate demand in second half of FY17.
Not only that, festive season festive season (Sep-Nov) induced buying coninciding with pay commission awards and a likely record harvest for kharif season are likely to further ring iin more consumption.
Central government employees will begin receiving higher salaries for August 2016 - together with accumulated arrears - payable early September 2016 under seventh central pay commission (7CPC). As per Deutsche Bank's estimates 1000 crore Central government employees and pensioners stand to cumulatively receive an incremental Rs 38960 crore at the end of the current month – including arrears.However, the house warns that the market may still be underestimating the degree of the combined impact of all the above-mentioned factors occurring simultaneously, as consumers are likely to embark on a consumption overdrive.
It states that consumer discretionary and retail financiers stand out as the key first order beneficiaries of a jump in disposable income as consumers satiate their demand for discretionary consumption items such as white goods, electronics, 2-wheelers and other high priced consumption products.
"From a systemic perspective, we see injection of 7th Pay Commission payments as a boost to domestic liquidity, which should be beneficial for banking system as a whole. As bond yields/ wholesale rates will likely move lower –ceteris paribus- predominantly wholesale funded NBFCs should also benefit. As the overall wallet of the urban consumer grows, our consumer analyst believes that benefits would also accrue to high-priced/premium consumption items as well," it says in a note.
Potential stock beneficiaries include Bajaj Finserv, GSK Consumer, Hero Motocorp, LIC Housing Finance, Titan and Whirlpool India.
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