FIIs Snap Sell-Off, Pour $438M into Consumer Stocks
Overview
Foreign institutional investors injected $438 million into Indian consumer durables in December, reversing a four-month selling trend. This strategic shift signals renewed confidence, driven by projected 20-30% earnings growth in H2 FY26, fueled by festive sales and lower costs. Analysts see this as a tactical play, positioning for improved valuations and sector-specific opportunities despite risks.
Stocks Mentioned
FIIs Return to Consumer Durables
Foreign institutional investors (FIIs) injected $438 million into Indian consumer durables in December, snapping a four-month selling streak. This move signals a potential shift in global fund allocation towards domestic Indian themes, according to Vipul Bhowar, senior director at Waterfield Advisors.
Earnings Outlook Fuels Optimism
The renewed buying interest is underpinned by expectations of significant earnings growth in the second half of fiscal year 2026. Many companies are projected to see a 20-30% rise in profit after tax (PAT), driven by anticipated strong festive season sales and reduced raw material costs. While current valuations might offer limited upside, the earnings momentum could exceed forecasts.
Sector Valuations and Performance Diverge
The sector's recent underperformance, with the BSE Consumer Durables index falling 1% over the past year against the Nifty 50's 12% gain, set the stage for renewed investor attention. Performance has been highly divergent, with some stocks like Asian Paints and Titan Co. gaining significantly, while others such as Blue Star and Havells India have seen substantial declines.
Tactical Plays and Sector Bets
Manish Valecha of Anand Rathi Institutional Equities noted that the FII buying appears tactical, focusing on opportunities for a stronger H1 CY26. Air conditioners and select electronics are expected to attract higher investor interest due to favourable growth prospects and seasonal advantages. Policy measures, like potential import duty hikes on electronics, could also support domestic manufacturers.
Risks to the Upside
Despite optimism, risks persist. A weak summer demand, rising input costs like copper, and delays in government approvals for joint ventures could impact margins and growth. Furthermore, if the US Federal Reserve delays interest rate cuts, a stronger dollar might trigger further risk-off selling in emerging markets. A disappointing Union Budget, lacking anticipated personal income tax relief, could also dampen the consumption boom narrative.
