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Synopsis
Fundamental issues and valuation adjustments ensured that consumer durables stocks relatively underperformed the bullish market of the last three years. But this year, a hot summer, a good monsoon, and the start of a festive season in which consumers are loosening their purse strings could mark a turnaround for these stocks. On top of it, their valuation readjustment process seems to be done and dusted. How do we know this? Because earnings have caught up even as prices have remained in range. Also, a number of companies have implemented restructuring strategies, including some sort of backward integration. All these together seem to have finally started to pay off.
When it comes to investing, it is fundamentals and earnings that matter. But sometimes, even before the numbers reflect improvements, prices give advance indications. What are the first signs of a sector or stocks having priced in the worst news? For one, they stop reacting to bad news – and with even minor positive news, they gain weight. In the last few months, consumer durables stocks are showing signs that after a long phase of
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