Stocks get heady from poll-related consumption

The stock market seems to have its own favourites when it comes to betting on the poll-related consumption boom this election season and some of them include shares of automakers, liquor firms, telcos and media companies.

Even as the battle for electoral supremacy picks up at a feverish pace, nimble-footed fund managers, high net worth investors and even some foreign institutions are buying into these "consumption plays" available once every five years alongside LS polls. 

Not to be left behind, retail investors are also buying these shares to reap polls-related gains, pushing the share prices of many of these companies higher by 10-50 per cent in the past one month.

 

While the benchmark index Sensex has itself gained about 6.8 per cent in 30 days and is above the 22,500 level after hitting record highs for the eighth straight session, stocks perceived to benefit from elections have shot up as much as 50 per cent in a month.

Even as bets on the new government getting a strong mandate are abound in what some say is a sure-shot 'hope rally', experts feel many listed firms are likely to benefit, at least in the short-term, from poll-related spending. This is driving investor interest in these counters, amid rising trading volumes.

A tonic of sentiments

"Poll-related spending comes into listed firms through media, automobiles, telecommunications, paper, liquor etc. Investors pick up fundamentally strong shares and hold them to benefit from this sentiment. It can land good gains pretty quick but is risky as well," said Alex Mathew, Head Research, Geojit BNP Paribas.

Makers of automobiles, including two-wheelers, cars, jeeps, SUVs and trucks, are said to benefit from poll managers spending big bucks on mobilising people for rallies. 

Hero Motocorp, TVS Motor, Maruti Suzuki, Force Motors and Eicher Motors have seen share prices spurting by 10-50 per cent in just a month.

 

Shares of breweries and distilleries are also witnessing good demand. 

Political parties as well as individual candidates are known to open their purses for luring voters. 

Besides tobacco products like cigarettes, distribution of free liquor is rampant in many rural and semi-urban areas in the run-up to actual polling day. 

Investors seem to be betting on this trend and shares of Empee Distilleries, Globus Spirits and Som Distilleries  have outperformed Sensex in the past one month. 

Tilaknagar Industries has given around 10 per cent gains. Scrips of United Spirits, the most popular among them, has shot up by 14 per cent in the same period.

The demand for non-alcoholic beverages is not far behind. 

Tea and coffee distributed at political gatherings, give a short term boost to firms making the raw materials.

With political rallies happening in full swing across the nation and numbers expected to rise as polls near, demand for paper, electrical equipment and bottled water is also surging. 

Electrical equipment suppliers like Crompton Greaves, Birla Power and Havells India have seen their shares gain 15-25 per cent in the past one month alone.

Poll spends push stocks

Mineral water maker Mount Everest has also seen its share price gain over 11 per cent in this period. 

Soaring temperatures, both inside and outside the poll battlefield, are likely to drive consumption of such products, said brokers explaining possible rise in the counter.

Media campaigns, which typically account for 20-25 per cent of poll spends in any election, have ensured shares of companies log handsome gains.

HT Media, ENIL, Jagran Prakashan, NDTV and TV18 Broadcast have jumped on bourses. 

 

Be it radio, TV or newspapers, media use is a key tool for political parties to reach potential voters.

"One must bear in mind that overseas investors are pumping funds in Indian markets. If poll-related outcome differs from expectations, things could turn ugly. 

Elections are a short-term theme. The long term one is the strength of the Indian economy," cautioned Anil Rego, CEO of financial advisory firm Right Horizons.

 

Telecom firms are also not far behind. SMSes, voice calls and mobile campaigns are helping leaders deliver their message as also create personal communication channels with voters. 

 

The likes of Bharti Airtel, Idea Cellular and Reliance Communications have seen stocks perk up in 10-20 per cent band in 30 days.

Paper companies have seen robust share price rises. Ballarpur Industries has seen its scrip rise nearly 15 per cent in one month but the bulk of gains came in last fortnight. 

 

The story is same for J K Paper and West Coast Paper stocks as well. Pamphlets, posters and outdoor campaigns are built purely on paper, say analysts.