Reduced short selling activity is also pointing towards bullishness. There was a significant short build up in June series, which came down in the July series. Since most of these short positions did not get carried forward to the August series, there is no major short position in the system now. Though it is too early to comment, the outcome so far has been good and this is keeping the market sentiments strong. “As per the Eliot Wave structure, the rally is not yet complete and what is happening right now is a consolidation. So, there is a high probability that the next move will be on the upside,” says Ratnaparkhi.
(Narendra Nathan/ET Bureau)
Sector update: Consumer durables
Digitization is the way forward for companies
Our analysis of the 2020-21 annual reports of Havells, Crompton Greaves Consumer, Polycab, V-Guard and Orient Electric (not rated) points to acceleration of: 1) Digitization efforts across internal and external verticals; 2) Distribution expansion to rural areas, E-Commerce & exports; 3) Product launches tailored for rural customers and premiumization of the portfolio by leveraging R&D; and 4) Supply-chain indigenization, multi-vendor sourcing and finding alternative raw materials. Covid-19 induced cost structure optimization was a common trend.
Digitization: Over the past few years, Havells has been leading the charge in terms of digitization, with 96% orders from the trade currently being generated from its digital portal. Introduction of order booking functionality for indirect channel partners on its Sampark app was a plus. V-Guard stepped up efforts and rolled out four pillars for digital strategy, focusing on distribution management, secondary sales, mobile app for instore promoters, and finance and marketing transformation. Crompton extended the dealer portal facility to around 400 channel partners and unified all its sales-related data. It is working on making this platform a ‘one-stop solution’ for direct channel partners. Polycab continued its endeavors with initiatives to integrate the supply chain, including warehouses and logistics. A dealer portal (P-connect), along with a mobile supply-chain app, was developed and unified with ERP, enabling ‘on-time-in-full’ deliveries up to 95-98%. Orient doubled down on digitization and accelerated the implementation of several initiatives.
Distribution expansion: Greater focus on e-commerce and rural distribution was common across companies, with dedicated product launches, extension of offerings on both channels and exclusive merchandise launches on e-commerce platforms from VGuard. In order to expand presence, some companies also set up separate distribution teams for e-commerce, as the channel saw robust revenue growth in 2020-21. Crompton, for the first time, stated plans to start exporting fans to the SAARC region. Havells believes that its international business is at an inflection point.
Product launches and premiumization: Keeping rural distribution augmentation in mind, companies launched dedicated products while also expanding the overall portfolio. Premiumization, better features and aesthetics, and product differentiation were of prime importance in new products. R&D investments were scaled up – Crompton (+27% y-o-y) led the pack for the second year in a row. Supply chain: Commodity super cycle has been an eye-opener for all the companies. Attempts for finding and evaluating an alternative to copper and de-risking through reducing dependency on imports have become a priority. Digitization and integration of the supply chain to drive efficiencies, build-up of a domestic vendor base, and enhancing in-house manufacturing took centerstage.
Cost optimization: There was a dip in other operating expenses, with Orient Electric recording the highest fall. The most common and obvious drop was in expenses related to ad and promotion, traveling and rent, while CSR and insurance expenses saw an increase. In terms of employee costs, Orient witnessed the maximum reduction, whereas Crompton and V-Guard saw the highest uptick.
(Emkay)
