Axis Direct says that rural consumption continues to outperform, aided by easing inflation, higher minimum support prices (MSPs) and increased government spending
Emphasising that the fast-moving consumer goods (FMCG) topline growth remained mixed in the second quarter of the current financial year (Q2FY26), a report has stated that the volume recovery is likely to be seen in the next two to three quarters.
A report by Axis Direct revealed that a pick-up is expected only from the second half of FY26 on account of recent goods and services tax (GST) 2.0 reforms, easing inflation, interest rate cut and above-normal monsoon.
Rural consumption continues to outperform, aided by easing inflation, higher minimum support prices (MSPs) and increased government spending, with a more broad-based recovery expected in H2FY26. The report highlighted that on the gross margins front, most companies reported muted performance during the last quarter.
“Indian FMCG companies are on a structural growth path, with several categories like shampoos and premium detergents still under-penetrated and underserved. Increasing rural penetration further strengthens the sector’s growth potential,” the report pointed out.
With rising purchasing power, Indian consumers are increasingly opting for premium and branded products. This premiumisation trend is expected to be a key growth driver for the FMCG sector, the report noted. Axis Direct added that easing rural inflation (with minimal impact from food inflation), higher government spending, better harvests, higher MSP and above normal rainfall outlook have improved overall sentiments in rural are expected to drive rural demand in the coming quarters as well.
Most Staples delivered single-digit topline growth in Q2FY26, aided by stable selective raw material prices with improving urban sentiment amid easing inflation, while rural demand remained more resilient. However, the Q2 was impacted due to temporary market disruptions caused by the transition to new pricing structures, as per the report.
