Consumer Staples See Positive Shift Amidst New Competitive Landscape, Jewelers Thrive Despite Rising Gold Prices

Motilal Oswal Financial Services predicts continued growth in consumer staples due to stable retail inflation and positive monsoon. Despite past struggles, a modest volume growth is expected. The jewellery sector shows resilience despite gold price hikes, driven by increased footfalls, store additions, and improved shopping experiences.

Consumer staples are showing marked improvement in volume growth, projected to continue through 2024-25, according to Motilal Oswal Financial Services. This outlook is driven by stable retail inflation, healthy monsoon progress, and government initiatives aimed at boosting the rural economy.

Companies in the consumer staples segment have faced significant challenges over the past two years due to erratic monsoons and high inflation, which impacted mass consumption. However, Motilal Oswal's latest report indicates a modest upswing in volume growth after a prolonged period of subdued demand.

In the April-June quarter, harsh summer conditions and election-related restrictions impacted out-of-home consumption of beverages, alcoholic drinks, and paints but surged demand for cooling products. Meanwhile, consistent new entries in the sector have led to increased competition, with companies investing heavily in capacity expansion.

The report highlights that weak discretionary demand and rising competition have negatively affected the paint industry. In contrast, the jewellery sector has shown strong growth, driven by an increase in store footfalls and same-store sales. Despite a rise in gold prices, the sector remains resilient, benefiting from shifts towards formal retail channels.

Factors such as higher ticket prices, enhanced shopping experiences, and a diverse product range are driving this trend. Motilal Oswal remains optimistic about the jewellery sector, citing positive external and internal factors contributing to earnings growth. The recent reduction in customs duties is expected to further accelerate this shift.

(With inputs from agencies.)