Demonetisation had positive impact on sectors like metals, capital goods

Four months since demonetisation and its impact has started to fade out. However, everything isn't gloom and doom as analysis show that there were a few sectors that gained from Prime Minister Narendra Modi's bold attempt to tackle black money and push India towards a less-cash economy. 

“In general those industries that were not directly linked with household spending behaviour tended to do better in this quarter with an added advantage of negative base effect,” analysts Dr Rucha Ranadive and Madan Sabnavis from Care Ratings said in a report dated March 15.

Image Source: Care Ratings report

The Care Ratings study on corporate results of 2126 companies for the third quarter between November to December 2016 showed growth of 6.6% in sales compared with -4.8% in the corresponding period of the previous year.

The report added, “Net profit (of the companies analysed) on the other hand grew by 39.7% over -11.3% last year.”

This growth was attributed to improvement of growth in sales in namely four sectors – capital goods, metals, finance companies and oil refinery related sectors.

“The improvement in growth in sales in this quarter can be attributed to the government proactive stance on infra. Other factors such as revival of steel industry also contributed to the higher growth rate in in the metals sector,” the report added.

Metals recorded the highest gains in Q3 amounting to 31.8% growth in sales; while finance companies with 15% increase and oil refinery sector with 13% increase were next to follow.

“The oil related sector did better on the back of an increase in the price of crude oil gradually over time,” the report said.  

The metals sector had recorded sales growth of -15.7% in Q3 FY16 while oil was the worst at -22.5% during the same period.

Image Source: Care Ratings report

“Consumer goods growth in September were extremely high with durable goods leading with double digit growth, which was expected to accelerate in October and November on the back of the festival and post-harvest demand,” the analysts said.

As per the report, FMCG companies recorded nearly 44% lower sales growth in Q3 as compared to the corresponding period of last year; while consumer durables sector recorded nearly 10-20% decline.