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With inflation continuing to pinch the input costs and general cautiousness in consumer sentiments globally due to ongoing Russia-Ukraine war, the overall mood in consumer durables industry has stayed mostly lukewarm. Stock specific performance has been mostly tepid in last couple of months with the general stress in benchmark indices hurting returns. However, on a year on year basis, counters like Timex, Titan and BPL have given very good returns. The aggregate output of the sector continued to fall though, indicating that elevated material prices are pinching the producers. The Consumer Durables index of industrial production tanked 3.3% on year to 119.80 in January 2022. It has contracted for three consecutive months now.
However, broad demand trends are still auguring good for the sector given the uptick in housing and continued economic recovery following pandemic contraction. The real estate sector in India is showing a sharp recovery in the recent period. According to an ANAROCK Research report, Quarterly housing sales in Q1 2022 are at an all-time high since 2015 with approximately 99,550 units sold across the top 7 cities. This data showed that it is a 71% yearly rise against approx. 58,290 units sold previously in Q1 2021. in addition to that, new launches across the top 7 cities have witnessed a 43% yearly increase, from 62,130 units in Q1 2021 to more than 89,150 units in Q1 2022. MMR and NCR are the two most significant areas for the real estate sector in India, which have accounted for more than 48% of the total sales among the top 7 cities. Additionally, NCR is also witnessing an above 114% yearly jump. With this sharp rise in the sector, investors are again gaining confidence and thinking more about investing in housing.
Dearness Allowance For Central Government Employees And Pensioners Hiked By 3% To 34%
The Union Cabinet chaired by the Prime Minister, NarendraModi, has given its approval to release an additional instalment of Dearness Allowance (DA) to Central Government employees and Dearness Relief (DR) to pensioners w.e.f. 01.01.2022 representing an increase of 3% over the existing rate of 31% of the Basic Pay/Pension, to compensate for price rise. This increase is in accordance with the accepted formula, which is based on the recommendations of the 7th Central Pay Commission. The combined impact on the exchequer on account of both Dearness Allowance and Dearness Relief would be Rs.9,544.50crore per annum. This will benefit about 47.68 lakh Central Government employees and 68.62 lakh pensioners.
Outlook:
Consumer durable and appliance companies have warned that a jump in crude oil prices could push up costs of everything from freight to packaging, forcing firms to hike prices again. The prices of key raw materials such as aluminium, steel, copper and high-density polyethylene are up 44.2%, 25.4%, 14.6% and 8.3%, respectively, in the fourth quarter of FY22 from a year ago, according to media reports. There is some leveling off in the broad commodity prices in metals segment and crude oil has also moderated from 14 year highs, providing some solace for the sector though given the overall scenario, near term scenario looks challenging for the sector.
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