New Delhi [India], June 30 : Driven by increased distribution of freebies and a positive sentiment from good monsoon, rural market in India's fast-moving consumer goods (FMCG) sector continues to outperform urban areas, according to a recent report by Nuvama Institutional Equities.
The report stated that rural markets continued to outpace urban areas in the overall FMCG sector. It noted that rural demand is already doing well and remains strong, while urban markets are facing pressure and are likely to stay under strain until the first half of FY26.
However, urban demand is expected to start improving from the second half of FY26, the report stated.
In terms of volume growth, rural regions have shown remarkable performance. For the fourth consecutive quarter, rural areas have grown more than twice as fast as urban regions. In Q4FY25, rural FMCG volumes grew by 8.4 per cent, while urban volume growth stood at 2.6 per cent, it said.
The report also highlighted that the FMCG sector volumes in Q4FY25 saw rural growth being three times higher than urban areas. Initial data for Q1FY26 suggests a similar trend is likely to continue.
Overall, the consumer sector grew 11 per cent year-on-year (YoY) by value in Q4FY25, compared to 10.6 per cent YoY in Q3FY25. Pricing growth was reported at 5.6 per cent, while overall volumes expanded by 5.1 per cent YoY, a slight decline from the 7.1 per cent YoY growth recorded in Q3FY25.
Despite the positive performance in rural markets, the FMCG sector saw a significant selloff by foreign portfolio investors (FPIs) in the first half of June 2025. According to the report, FMCG recorded the highest outflows of Rs 36.3 billion, after receiving net inflows worth Rs 8.2 billion in May.
Until May, the sector witnessed sales worth over Rs 140 billion.
The report added that FPIs showed a strong inclination towards rate-sensitive and beta plays, contributing to the withdrawal from FMCG stocks.
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