No Benefit From Pay Commission Salary Hikes? Buy These Stocks
The seventh Pay Commission’s recommendation of 23.55 per cent salary hikes will be applicable for central government employees, but individuals in the private sector can also benefit from the consumption story that will unfold following the implementation of the report from January 1, 2016.
Analysts say salary hikes for government employees will boost domestic consumption demand and GDP growth, benefitting a number of consumer discretionary companies.
India’s biggest car maker Maruti Suzuki tops the list of companies that may see a strong growth in sales in the coming months, analysts say.
“Maruti Suzuki would likely be a key beneficiary as its products in the entry segment would appeal to these employees. After the Sixth Pay Commission, Maruti’s sales to government employees rose from 4 per cent of volumes in 2007-08 to 14 per cent in FY2010-11,” said Nomura.
Car sales are expected to rise from 8 per cent in 20015-16 to 15 per cent in 2016-17, according to Nomura estimates. Sales of two-wheelers are also likely to pick up, though they may not witness the same momentum as four-wheelers.
“Penetration of two-wheelers would already be very high in this segment; thus, assuming a 5 per cent incremental conversion ratio, we arrive at 3-5 per cent incremental demand over next two years,” the brokerage said.
Among two-wheelers, Bajaj Auto and Hero MotoCorp may see higher sales, Religare said.
Jubilant FoodWorks (which runs the Domino’s chain of pizza restaurants in India), Asian Paints, AC and other electrical goods manufacturere Voltas and Kajaria Ceramics (makes tiles) are some other stocks that can benefit from discretionary spend on implementation of the seventh Pay Commission report, Religare added.
Read full article: NDTV
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