“As demand deepens and widens across the smaller markets
within the hinterlands, companies need to re-evaluate market strategy to identify and prioritise new growth centres. Success within micro-markets
will, however, depend on the ability of players to develop robust sales channels and operating models to reach customers in an efficient and cost-effective manner,” says an August note by PwC.
Long road ahead
Given that Covid-19 has reached the hinterland and urban India is grappling with job losses and paycuts, analysts expect recovery in the consumer durables
segment to be slow and a long-drawn-out affair. “Lockdowns resulted in wage cuts and layoffs in the April–June 2020 quarter and many firms also deferred pay hikes and variable pay. If the wage scenario improves in the second half of FY21, consumption demand should benefit,” says the Nomura
The uptick in consumer durables
stocks at the bourses over the past few months, say analysts, has mostly been on account of an upmove in the mid- and small-cap segments, where most of these counters get classified. Moreover, the hope of demand recovery, led by higher consumption in the rural belt, has aided sentiment, they say.
“Rural economy is not a sufficient enough driver to pull us back into a positive growth rate — we need a broader urban recovery for that. Rural, which is largely dependent on agricultural income, will only serve as a downside protection — and in general, perhaps support around 40-50 per cent of the mix of demand for various categories in consumption for front-line companies,” cautions Venugopal Garre, India strategist at Bernstein.
G Chokkalingam, founder and chief investment officer at Equinomics Research & Advisory, suggests investing in these counters from a 12–18 month perspective — that too on a decline. “I think the next two quarters will be bad for consumer durables firms as Covid-19 cases continue to surge. People will only spend on essentials and defer purchase of discretionary items. A full-blown recovery in sales of companies and the stocks at the bourses are still some time away,” says Chokkalingam.