Consumer durables stocks have seen a bumpy ride on the bourses over the past few months, as urban demand softened. Falling consumption has weighed on corporate earnings with the near-term outlook turning cloudy as buyers turn thrifty, pinching their pockets as liquidity in the system dries up and inflation weighs heavy. Investors and market experts are pencilling in measures for the upcoming Union Budget to revive the depressed sector.
From import reductions, extension of PLI schemes, and boosting domestic manufacturing, industry players are confident that the central government will be sure to include policies to boost demand for consumer durable products in the upcoming budget.
Further, consumption can also see an uptick if there are any tax relief measures announced or if there are any further outlays for the rural sector. A review of personal income tax slabs will ensure consumers have more money in their hands, which would lead to an uptick in demand and consumption.
“The above will not only provide tailwinds to the consumer durables industry but also have a multiplier effect on the industries that serve them, through increased capacity utilization and hence also pave the way for private investments to flow in at a faster pace,” said Anil G. Verma, CEO, Godrej Enterprises.
On the corporate side, many are hoping that the scope of the Production Linked Incentive (PLI) scheme is broadened, which can boost local manufacturing, attract investments, drive innovation, and generate employment.
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In a report, Bank of America Securities wrote, “The government would want to press the pedal on extending the PLI schemes that have performed well and introduce new incentives on this front. A PLI of Rs 25,000 crore for electronic components manufacturing is also likely to be announced.”
Apart from an increase in PLI allocations, BofA Securities believes that the government could reduce import duties on components, such as compressors or semiconductors. This in turn, would bring down production costs and make the final goods cheaper to the end consumers and boost demand.
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The FY25 budget will also see measures to boost exports of value-added products, especially those that are not labour intensive, by offering them rupee export credit at competitive rates, added BofA Securities.
Stocks to watch
Companies such as Polycab India, Dixon Technologies and Amber Enterprises could gain from government incentives for manufacturing and electronics production.
Any measures to spur consumption could result in shares of Titan Company, Trent, or Bata India surging in trade.
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