With 7th pay panel suggestions on table, consumer firms like Britannia, HUL take centre stage on Dalal Street

Consumer discretionary companies are back in the limelight on the bourses on news that the Cabinet is set to consider the recommendations of the seventh Pay Commission on Wednesday, which could inject over Rs 1 lakh crore into the economy. Analysts said consumer durables, travel & leisure, real estate and textiles, among others are likely to benefit from the pay out.

The seventh Pay Commission has recommended 23.55% increase in pay and allowances of serving central government employees and 24% increase in pension of retired officers.

Hindustan Unilever gained 3.36% on Tuesday while ITC, Eicher Motors, Britannia and Bata India rose between 2% and 3% compared with 0.5% gain in benchmark Sensex.



“This pay increase is likely to have a positive effect on discretionary demand,” said Manish Jain, VP-equity research, Nomura. “We feel it is safe to assume that higher disposable incomes will lead to the consumption of premium range products in most categories”.

The sixth Pay Commission recommended a salary hike of about 35% on an average which was implemented from September 2008 led to a sustained increase in consumption.