FMCG sector set for recovery in H1FY26; Consumer durables show long-term strength: Report

New Delhi [India], May 12 : The fast-moving consumer goods (FMCG) sector is expected to see a rebound in demand in the first half of financial year 2025-26, supported by a revival in rural markets, easing inflation, and favorable pricing strategies, according to a recent report by ShriRam Mutual Fund.

The report stated that while this anticipated recovery comes after a period of mixed performance, especially as companies look forward to improved consumption trends across both urban and rural areas.

It said, "FMCG is poised for a demand rebound in H1FY26, aided by rural recovery, softening inflation, and supportive pricing".

On the other hand, the consumer durable sector also maintains a positive outlook but with challenges, particularly for categories like electrical consumer durables (ECD) and room air conditioners (RACs).

The demand for premium products and the effect of rising temperatures are expected to boost sales, especially for brands with a strong presence in fans and cooling appliances.

However, the report warned of some challenges. High raw material costs and limited ability to pass on those costs to consumers may impact profit margins, particularly in the RAC segment.

The report said, "High raw material costs and limited pricing power may pressure RAC margins."

Additionally, a delayed summer season affected sales in the southern region, though demand in northern parts of the country has seen a pickup.

On the equity market front, the report highlighted increasing volatility in domestic markets, driven largely by global concerns. The fear of a potential global trade war, following tariff impositions by the United States, has led to uncertainty.

This has caused jitters in global financial markets and is contributing to short-term market fluctuations.

Despite these concerns, both the FMCG and consumer durables sectors posted strong gains over the past month. The Nifty FMCG index rose by 5.33 per cent, while Nifty Consumer Durables climbed 4.06 per cent, reflecting optimism around domestic consumption, helped by stable input costs and improving demand.

However, looking at a three-month period, the gains were more modest. Nifty Consumer Durables rose by just 1.09 per cent, and Nifty FMCG inched up 1.60 per cent. This suggests some investor caution, especially around the pace of rural recovery in the FMCG space.

Over six months, both sectors showed declinesNifty FMCG dropped 5.53 per cent and Nifty Consumer Durables fell 6.30 per centindicating pressure from higher interest rates and inflation, which have likely impacted consumer spending.

In the long term, Nifty Consumer Durables outperformed FMCG, rising 7.13 per cent over the past year, compared to FMCG's 4.06 per cent gain.

Overall, while both sectors have shown signs of recovery in the short term, consumer durables appear to have stronger investor confidence for the long run.

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