Monsoon, Seventh Pay Panel Will Trigger Recovery in FMCG Sector: Nomura
The consumer goods sector in India will recover in the second half of the year despite the subdued demand environment, says global financial giant Nomura.
The resumption of normal monsoon and implementation of the Seventh Pay Panel recommendations is expected to spur the recovery. The consumer goods market may see a 15.6 percent revenue growth in the second half of financial year 2016-17, the brokerage adds.
Coping With Weak Demand
Stabilising prices of raw materials such as palm oil, crude, LAB and polymer, have kept the companies confident about the recovery, Nomura points out, adding that this will discourage price wars.
While rural demand has been weak, urban consumption too has been mixed. Muted demand has forced companies to innovate and re-think strategies, leading towards premiumisation of products, the brokerage says.
Here are the other highlights from Nomura’s report on the consumer goods sector:
- Valuations in the FMCG sector have run up approximately 10 percent in the last three months, signalling positive market sentiment on the sector.
- Homegrown companies like Patanjali are getting increasingly popular.
- There has been a reduction in promotional activity such as discount offerings.
- Instead, companies are diverting a higher proportion of their advertising and promotional spending towards digital marketing. So far, the trend is only popular in urban areas.