Heard of revenge spending? That’s the hottest theme for stock picking now

NEW DELHI: The trend emerging on Dalal Street over the past few weeks suggests investors have started shifting to some of the sectors worst affected by the Covid second wave.

Available data shows stocks from hotels, travel, media & entertainment and consumer discretionary sectors like auto have grabbed limelight and jumped exponentially, including some of them from the smallcap segment.

The market is known to discount 3-6 months’ future earnings at current prices. Declining Covid cases and a rapid vaccination drive have boosted investor confidence in this pocket, as they expect the situation to be much better in a few months.

This is also the view of Big Bull Rakesh Jhunjhunwala. “I will change my name if you get a booking at any resort in November-December. No one will buy right now, but no one will be willing to sell after five years,” he said in a recent interview with a TV news channel.

The ace investor said he was confident that sectors like hospitality, restaurant and aviation would come back with a bang over the next few months.

India reported a record number of daily cases on May 6, following which the caseload has declined steadily. Since then, some of the stocks from the hospitality industry have gained up to 50 per cent.

Oriental Hotels, Viceroy Hotels, Kamat Hotels (India),

, Gujarat Hotels, HS India, , Polo Hotels, & Resorts and Thomas Cook (India) are some of the biggest gainers from the industry, rising between 24 per cent and 46 per cent.

Buying has also been seen in the auto, media and hospitality sectors, with some of the stocks hitting upper circuits on many days. In the last one month, Nifty Media Index has jumped over 13 per cent, led by Dish TV, which has risen 38 per cent. Similarly, Nifty Auto has risen over 8 per cent. Only the currently trending metals and PSU Bank indices have outperformed them during this period.

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“India has one of the most resilient economies in the world. Once the vaccination drive covers most states, we would see sharp recovery in economic activities. Both retail spending and institutional investments would gain pace. We can see the consumer driven sector back in the driver’s seat once the pandemic concerns evaporate,” said Sandeep Bhardwaj, CEO, Retail, IIFL Securities.

Individually, shares of some of the biggest names from leisure and tourism sectors viz. PVR, Eros Media,

, , InterGlobe Aviation have surged 10-35 per cent in the last one month.

Businesses of these companies largely depend on how much consumers are willing to splurge. And, theories circulating in the market suggest the growth outlook for them has improved drastically thanks to the potential pent-up demand.

Most analysts believe the biggest beneficiaries of such a revenge spending, i.e., splurging after a period when one has had limited opportunities to spend, this time around will be above-mentioned sectors.

However, they also warned that the pent-up demand would not be as much as it was seen after the first phase of lockdown last year, when virtually everything had come to standstill. This time, the lockdown was sporadic and most segments of the economy have more or less remained open for business.



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