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The upcoming festive season is expected to boost the auto, hospitality, and consumer durable industry on the back of strong demand. However, the operating margins of FMCG companies are likely to remain under pressure in spite of the drop in input costs. This is because demand recovery from rural India, which accounts for around 40% of FMCG sales, has still not recovered, according to Teresa John, Research Analyst (Economist), Nirmal Bang. Additionally, the southwest monsoon is also expected to delay recovery in rural demand. At the same time, in spite of a persistent decline in input costs amid falling commodity prices, marketers of daily essentials, groceries, and packaged commodities do not intend to lower prices in October ahead of the festive season.
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Consumer durables, home appliance manufacturers expect 35% YoY increase in sales during festive season
According to the report, manufacturers of consumer durables and home appliances expect up to a 35% year-on-year increase in sales during this festive season as a result of increasing demand for premium goods and price hikes. However, some companies are ‘cautiously optimistic’ about sales of their entry-level mass products in the country’s rural areas. As for the auto industry, entry-level vehicles in both passenger, as well as, two-wheeler segments are also set to register bumper sales, and are expected to push sales of entry-level vehicles. Beauty and personal care companies are expecting to see strong double-digit growth in the upcoming festive season.
Hospitality industry to get a boost in festive season
The hospitality industry is also expected to get a boost as according to RateGain PULSE Report, India is likely to witness over 2.53 million inbound international travellers through Delhi and Mumbai airports during the festive season between Sep- Nov. Hospitality consultancy HVS observed that demand for hotel rooms has jumped by 60% year-on-year during January-July 2022. However, hotel room supply has increased by only 1-2%. It expects demand to continue to grow in double digits and supply to grow at a CAGR of 3-4% over the next 6-7 years, the company said. India’s hiring outlook indicates strong sentiments for the Oct-Dec period as around 54% of companies are planning to hire in the next three months, said Manpower Group Employment Outlook survey.
Economic activity healthy in first fortnight of September
According to Nirmal Bang’s Fortnightly Macro Tracker report, India’s economic activity in the first fortnight of September remained healthy. Mobility for retail & recreation and essential services improved marginally, while workplace mobility and use of public transport moderated. Urban and rural unemployment declined, with rural unemployment coming in at 6.6% and urban unemployment at 8.1%. As of 16 September, total Khari crop sown area was down by 8.95% on-year, while the area under rice, pulses, oilseeds was also down on-year. However, area under coarse cereals was up by 7.3%.
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FPI buying, India VIX steady in first half of Sep
Meanwhile, bank credit growth stood at 15.5% year-on-year, up from 15.3% in the previous fortnight. Electricity generation also remained healthy, but moderated from the previous fortnight. Markets witnessed FPIs buying Indian equities worth $1 billion in the first half of September, while DIIs sold equities worth $0.4 billion. FPIs invested $0.2 billion in Indian debt. India VIX was steady from the previous fortnight.
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