Analysts at research and brokerage firm Axis Capital noted that staples have recovered smartly, almost back to pre-COVID on exit basis while discretionary is witnessing a pent-up led boost in June
Amid uncertainty led by COVID-19 disruption, closures in metro towns, rise in unemployment and salary cuts across the country weakened consumer sentiments, which dented consumption in FY21. Even though initial trends displayed a surge in demand for household and packaged food, as the majority of people were working from home, analysts say that the consumer demand is now shifting to health and wellness products. “COVID-19 has changed the way businesses are being run, impacting almost all industries but the likes of FMCG sector, have managed to mitigate the effect of the slowdown to some extent ahead of the FY20-21 Q1 results,” Aamar Deo Singh, Head Advisory, Angel Broking, told Financial Express Online. He further said that strong rural growth, coupled with the opening of the economy, is likely to be supportive for the consumption sector.
Research and brokerage firm Centrum highlighted that rural sales are likely to recover faster than urban in the April-June quarter of the current fiscal. The brokerage firm supported its argument saying that government stimulus and increase in MGNREGA allocation of Rs 40,000 crore could aid jobs for rural migrants. “Moreover, the agriculture ministry’s estimate of 13% more sowing points to a bumper Kharif crop,” it said in a report.
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Analysts at research and brokerage firm Axis Capital noted that staples have recovered smartly, almost back to pre-COVID on exit basis, while discretionary is witnessing a pent-up led boost in June where sustainability remains in question. It called out a few trends such as rural to outperform urban; food, health, hygiene and wellness categories witnessing strong tailwinds; and many staples have ramped up portfolio through NPDs (new product development).
These stocks may beat COVID-19 woes
From a long-term perspective, Aamar Deo Singh maintains a positive view on Colgate-Palmolive and Britannia Industries. “While a V-shaped recovery is very unlikely, it may take some time for the domestic economy to recover to its pre-COVID levels,” he added.
Coronavirus pandemic led to standard operating procedures at offices and factories, shortage of manpower and labour to run operations and higher transportation costs. The top stock picks of brokerage firm Centrum are Britannia Industries as it is focusing on direct distribution in gaining market share with rising profitability; Asian Paints as demand generation through strong advertising leading to volume growth; Dabur India as the focus on power brands through cluster strategy reaping benefits in rural; and ITC on the back of compelling valuation. The brokerage firm sees up to 10 per cent upside and iterates a ‘buy’ rating to these stocks. The firm believes that as affordability has become more important, the consumer demand would be driven by value-for-money products and low unit packs.
Axis Capital expects Britannia Industries and Nestle India to post robust growth led by higher in-home cooking/consumption trends. While from the home and personal care segment, it believes Godrej Consumer Products (GCPL) will perform relatively better.
(The stock recommendations in this story are by the respective research and brokerage firms. Financial Express Online does not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)