How will OPEC production cuts affect India?
The decision by OPEC+ to impose larger-than-expected output cuts in a bid to spur a recovery in crude prices could become a cause for concern for India. Let's delve into its possible impact on India
Puneet WadhwaBhaswar Kumar New Delhi
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Photo: Bloomberg
India’s consumption sector is playing on the front foot this festive season, as consumers rush to markets and restaurants after two dull years marred by the pandemic.
Despite price hikes, inflation and muted rural demand, aggregate sales volume for consumer goods remained steady during the July-September quarter.
Analysts see the trend sustaining as discretionary demand remains strong in the middle and upper-middle class of population.
“Huge pent-up demand continued to fire growth in most discretionary segments in Q2FY23. Staples consumption in rural India remained more impacted, than overall urban consumption, due to inflation. Going ahead, rural demand is expected to bounce back in second half of FY23 on low base, and favourable monsoon,” says Amnish Aggarwal, Head of Research, Prabhudas Lilladher.
His assessment may be playing out on the ground at the moment. The recently concluded nine-day Navratri festival saw retailers clock their highest footfalls in two-three years across segments such as automobiles, consumer appliances, and apparels.
And since price hikes taken by companies in Q1 have been absorbed well by customers, analysts expect this consumption trend to remain strong, given festive period, and year-end celebrations in Q3FY23.
Deepak Jasani, Head of Retail, HDFC Securities says, Nifty FMCG index outperformed in Q2FY23. Also, improving sentiment ahead of festive period boosted returns. Sustainable recovery in rural FMCG growth could be the next big trigger, he indicates.
Jasani expects FMCG companies to witness significant gross margin expansion between FY22-24, assuming normalisation of input costs and partial reversal of price hikes.
From an investment view-point, Nishit Master of Axis Securities PMS likes EIH, Aditya Birla Fashion and Retail, Maruti Suzuki, M&M, Tata Motors, Westlife Development, Jubilant Food, Trent and Bata.
As regards today, global cues, oil prices and stock-specific action will guide the investor sentiment.
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First Published: Oct 07 2022 | 8:32 AM IST
