Is this the right time to sell/short high flying consumption stocks in India?
First of all, let me make it clear that I am not talking about HUL or ITC. It has got more to do with the likes of TTK Prestige or Page Inds. I will list out my short-selling stocks later.
Short-selling is an art in itself. Not too many in the world have done it successfully in a consistent manner.
So am I bearish on these stories? If yes, why?
- A lot of the growth that these companies have achieved over the last 2-3 years has been a function of government spending. Whether it is the 6th pay commission handouts or the collosal spending otherwise. The large fiscal deficit is a reflection of that. But now the government is itself running on financial resources.The fiscal deficit is still large, but has flattened out. And most of the increase in the deficit is now in subsidies rather direct payouts in the hands of the people. In fact, I dont think it would incorrect to say that the direct payout component will go down moving ahead. These handouts were one of the reasons why the consumer durable industry had such a good time in the last 2-3 years.
- Inflation has sapped the purchasing power of the people. With no government payouts in the offing, discretionary expenditure should see a cut.
- If the whole of Europe is in trouble, particularly the banking industry based there. Than it is very likely that the IT industry here in India will find it tough to grow. That makes it likely that graduates will find it difficult to find campus jobs or laterals may find it difficult to hop. And that might apply not only to the IT industry but also to other export facing industries as well.Generally speaking there could be an environment where there is a bit of scare and loss of confidence. These two things can really dent the psyche and postpone purchases.
- From a stock market point of view, these stocks are very richly valued. They are building in a lot of growth in the next 2-3 years. If the above factors are reasonably correct, then those growth expectations are not going to be met. That should lead to a fall in stock prices.
- There is a uniform consensus that the consumption story in India is going to continue strong, even though there are some indications that it may not be so. 4-wheeler sales are flattening out. Consumer durables did not report good numbers in their peak summer season. This uniform growth consensus, despite a few contrary indicators, has the potential to boomerang if things dont turnout the way people are expecting them to.
I am listing down the stocks that I think should be sold or shorted, in no particular order. I am also noting down the prices as of today in brackets.
- Page Inds (2515)
- TTK Prestige (2573)
- Jubilant Foods(870)
- Hawkins(1524)
- Whirlpool(225)
- Hitachi (162)
- Lovable Lingerie (462)
- Titan(205)
- Zydus Wellness(530)
I may have missed out a few more.
CAUTION: It is always advised, and very wisely so, that going against the trend in a market is a fool's idea. Even if your thinking process is on the right track, it is famously said "Markets can be irrational longer than you can be solvent".
But trend reversals do take place. And I think there are enough indications for that to happen.
Of course, I can be wrong but then that is a part of being in the market and a part of the never-ending learning process.
Happy shorting!! :)
First of all, let me make it clear that I am not talking about HUL or ITC. It has got more to do with the likes of TTK Prestige or Page Inds. I will list out my short-selling stocks later.
Short-selling is an art in itself. Not too many in the world have done it successfully in a consistent manner.
So am I bearish on these stories? If yes, why?
- A lot of the growth that these companies have achieved over the last 2-3 years has been a function of government spending. Whether it is the 6th pay commission handouts or the collosal spending otherwise. The large fiscal deficit is a reflection of that. But now the government is itself running on financial resources.The fiscal deficit is still large, but has flattened out. And most of the increase in the deficit is now in subsidies rather direct payouts in the hands of the people. In fact, I dont think it would incorrect to say that the direct payout component will go down moving ahead. These handouts were one of the reasons why the consumer durable industry had such a good time in the last 2-3 years.
- Inflation has sapped the purchasing power of the people. With no government payouts in the offing, discretionary expenditure should see a cut.
- If the whole of Europe is in trouble, particularly the banking industry based there. Than it is very likely that the IT industry here in India will find it tough to grow. That makes it likely that graduates will find it difficult to find campus jobs or laterals may find it difficult to hop. And that might apply not only to the IT industry but also to other export facing industries as well.Generally speaking there could be an environment where there is a bit of scare and loss of confidence. These two things can really dent the psyche and postpone purchases.
- From a stock market point of view, these stocks are very richly valued. They are building in a lot of growth in the next 2-3 years. If the above factors are reasonably correct, then those growth expectations are not going to be met. That should lead to a fall in stock prices.
- There is a uniform consensus that the consumption story in India is going to continue strong, even though there are some indications that it may not be so. 4-wheeler sales are flattening out. Consumer durables did not report good numbers in their peak summer season. This uniform growth consensus, despite a few contrary indicators, has the potential to boomerang if things dont turnout the way people are expecting them to.
I am listing down the stocks that I think should be sold or shorted, in no particular order. I am also noting down the prices as of today in brackets.
- Page Inds (2515)
- TTK Prestige (2573)
- Jubilant Foods(870)
- Hawkins(1524)
- Whirlpool(225)
- Hitachi (162)
- Lovable Lingerie (462)
- Titan(205)
- Zydus Wellness(530)
I may have missed out a few more.
CAUTION: It is always advised, and very wisely so, that going against the trend in a market is a fool's idea. Even if your thinking process is on the right track, it is famously said "Markets can be irrational longer than you can be solvent".
But trend reversals do take place. And I think there are enough indications for that to happen.
Of course, I can be wrong but then that is a part of being in the market and a part of the never-ending learning process.
Happy shorting!! :)
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