Consumption Recovery Yet to Materialise ::Edelweiss, link

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Post a strong verdict for a progressive government, India has been amongst the best performing markets globally as expectations of a robust recovery in India have risen. However, Q2FY15 revenue of our coverage universe presented weak growth of ~6.1% versus 12-13% growth levels seen in the preceding three quarters raising questions of strength of demand. Sensing investor concerns on demand, we instituted a consumer demand survey of ~45 intermediaries and unlisted companies across auto, branded apparel, FMCG, real estate, retail banking and consumer durables sectors under our much acclaimed EdelPulse format. Demand recovery is clearly delayed and pricing power remains weak.  Consumer demand recovery remains incumbent on a macro-economic recovery with dealers, for the first time, highlighting interest rate cuts as a potential demand driver. Urban demand recovery remains key for discretionary growth with consumer, auto, real estate and white goods being expected beneficiaries of the same.

Demand recovery deferred

Demand across the sectors surveyed reported a delay in recovery. Despite a strong verdict for a progressive government and expectations of robust recovery, on-the-ground demand has yet to show visible pick up. Q2FY15 revenues reflected weak growth and our feedback from surveying intermediaries was not encouraging. Intermediaries indicated high single-digit decline at retail level in passenger vehicles (PV) and two wheelers (2W). Branded apparels too are yet to show signs of pick-up, with worse-off demand at distributor level mainly due to negative impact of E-commerce. White goods with 10-12% growth (led by west and north India) and FMCG with signs of stabilisation were better off sectors, but declined too. Predictably, real estate is the worst impacted.

Price hikes not on horizon

Pricing power remains weak across industries, primarily due to delay in demand recovery. As per intermediaries, auto sector discounts should increase in December led by end-of-year stock liquidation; branded apparels should also see a correction next year led by lower input costs being passed on. Consumer goods pricing remained strong amidst high competition. Real estate again is the worst off, with expectations of price correction in NCR, softness in Mumbai and stagnant prices in Bengaluru. E-commerce too saw competition intensifying in white goods/branded apparel sectors.

LINK
https://www.edelweiss.in/research/Edel-Pulse--Consumption-Recovery-Yet-to-Materialise/27830.html