From Voltas to Vadilal, ice cream and AC stocks surge on hot summer forecast
- AC makers expect slightly higher temperatures this summer, as predicted by the Met department, will push sales
- Since 13 February, AC and ice cream stocks outperformed Sensex, BSE Midcap and BSE SmallCap indices
Mumbai: Expectations of a harsh summer have driven up shares of air-conditioner and ice cream companies, which have outperformed benchmark indices in the last two months. Since 13 February, AC and ice cream stocks have gained up to 22%, while the Sensex, BSE MidCap and BSE SmallCap indices have gained 8%, 9.29% and 11.99%, respectively.
Analysts said business sales and product launches are likely to pick up during summer.
The India Meteorological Department (IMD) had said that north India, along with parts of southern and north-eastern regions of the country, may experience ‘above normal’ summer in the March-May period this year. It had said there was 37% probability of the maximum temperatures in 2019 being above normal in the core heatwave zones of Punjab, Himachal Pradesh, Uttarakhand, Delhi, Haryana, Rajasthan, Uttar Pradesh, Gujarat, Madhya Pradesh, Chhattisgarh, Bihar, Jharkhand, West Bengal, Odisha and Telangana.
AC makers said they were seeing better sales this year after two successive years of weak growth and expected a double-digit rise in their sales this season. They expect that slightly higher temperatures this summer, as predicted by the Met department, will push sales.
Typically, these companies launch offers, such as easy finance, extended warranty and free service, to attract more customers during summer.
“This year, the IMD has predicted strong summers, and some of the green shoots are already visible with temperatures rising in southern India in March itself, and markets showing buoyancy in parts of east and west India,” Voltas managing director and CEO Pradeep Bakshi said.
Shares of AC makers, including Voltas, Blue Star, Symphony and Johnson Controls-Hitachi Air Conditioning India, are up 22.17%, 16.04%, 16.86% and 16.91%, respectively, since 13 February. Electric fan maker Bajaj Electricals rose 21.94% in the same period.
Meanwhile, shares of ice cream makers such as Vadilal Industries and Hatsun Agro, have jumped 20% and 12.28%, respectively.
Deepak Jasani, head of retail research, HDFC Securities Ltd, attributed the spurt in stocks to the onset of summer. “Most of these stocks are rallying on hopes that business in these categories is likely to pick up due to surge in sales and product launches in summer. The possibility of El Nino pattern playing out this year and of late onset of June rains could also help sales of these products. Also, the rally in these stocks coincided with the significant increase in prices of mid and small cap stocks.”
Meanwhile, the IMD, in its first-stage forecast, on Monday predicted ‘near normal’ South-West monsoon (June-September 2019).
Quantitatively, rainfall activity is likely to be 96% of the long-period average (LPA) versus 91% actual rainfall last year. IMD expects weak El Nino conditions to prevail during the later part of the season, but with reduced intensity. Typically, El Nino is unfavourable for rainfall in India. The department’s forecasts are in contrast with that of private forecaster Skymet, which has predicted a ‘below normal’ monsoon. Quantitatively, Skymet has pegged rainfall activity at 93% of LPA.
IMD expects rainfall to be well-distributed, however, details of spatial and temporal distribution will be available only in the June forecast. Hence, IMD’s second-stage forecast will be more critical.
PTI contributed to this story.
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