By Nitasha Shankar
It’s been a year since demonetisation was announced. While some sectors and stocks benefited, some were fairly impacted. Here is a complete lowdown on stocks and sectors that were impacted in the one year period post demonetisation.
Tiles & Ply:
The tiles sector has been badly hit post demonetisation, and the introduction of GST (rate of 28 percent) has further impacted growth as the price differential between unorganised and organised players increased, leading to tepid revenues.
About four-fifths of tile and ply is used as new demand, with the balance being used as replacement demand. With the benign real estate activity post introduction of demonetisation and RERA, the growth has been further impacted.
Stocks – Kajaria Ceramics, Somany Ceramics, Century Ply, Green Ply
Around 38-40 percent of FMCG sales happen through the wholesale channel which largely deals in cash and is not entirely tax compliant.
The lower liquidity situation post demonetisation and prudent tax laws of GST have not led this channel to be completely out of woods yet.
To offset the loss in demand, most FMCG players are increasing their direct reach and bypassing the wholesale channel.
Stocks – Emami, Bajaj Corp, Marico, Hindustan Unilever, Colgate
Automobile (2 Wheelers):
Post demonetisation, cash flows of rural India (majorly a cash economy) were impacted the most due to liquidity crunch. This impacted sales of 2-wheeler companies which have sizable sales in rural parts of the country.
However, sales have picked up once the liquidity crisis eased.
Stocks – Hero Moto, TVS Motor, Bajaj Auto
High ticket purchases, especially in the white goods space, were impacted post demonetization. However, sales did improve over subsequent quarters as the liquidity situation got better.
Stocks – Whirlpool of India, IFB Industries
With the luggage industry being levied by a GST rate of 28 percent, it has widened the gap between the organized and unorganized players. This has made it difficult for the large players to completely pass on prices to customers.
Stocks: VIP Industries, Safari Industries
Demonetisation and GST made it difficult for smaller jewellers to do business as the majority of their transaction were done with cash. As more than 70 percent of the jewellery sales used to happen through unorganised/regional players, it led to a structural shift in demand to organized players leading to strong sales growth.
Stocks – Titan Industries, PC Jeweller, TBZ
As per estimates, demonetisation brought back almost Rs 2-3 trillion of money into the mainstream economy, which was supposedly lying ideal.
With real estate in the doldrums and uncertainty in gold prices as well as the low rates of debt instruments, equities have emerged as the only investable asset class leading to huge inflows of money towards the same.
This has led to healthy growth in revenues for brokerage houses.
Stocks – Motilal Oswal, Edelweiss, JM Financial
Retail (Modern Trade):
For FMCG products, the Wholesale channel was impacted due to liquidity crunch which led to increase in the market share for Modern retail. The modern trade which used to be 9 percent of overall FMCG revenue is expected to double in next 5 years.
Stocks – Future Retail, Avenue Supermart, V-MartDisclaimer:
The author is Sr. Vice President and Head of Research at YES Securities (I) Ltd. The views and investment tips expressed by the investment expert on Moneycontrol.com are her own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.