Consumer-oriented companies remain cautious about near-term outlook: KIE's Pratik Gupta

FMCG

Consumer-oriented companies, irrespective of whether they deal with consumer discretionary items or consumer staples, are not expecting an immediate rebound in growth, according to Kotak Institutional Equities CEO and Co-head (Equities) Pratik Gupta.

Gupta was talking to the media during Kotak’s investor conference which was attended by 215 companies along with 1,000 plus investors, including 207 FIIs and 803 DIIs.

Speaking about some pockets which may see consumption revival, Gupta noted that there is an expectation that demand could pick up given the good monsoon and strong crop yields on the rural side.

Additionally, the recent income tax cuts announced in the Union Budget are expected to provide some boost to consumption. "How much, no one knows. Everyone has their own different views. But some of it should boost consumption, especially low-ticket discretionary spending," Gupta said.

In the Union Budget, Finance Minister Nirmala Sitharaman had announced that the income tax exemption limit under the new IT regime has been raised from Rs 7 lakh to Rs 12 lakh, reducing the tax burden on consumers. This measure is likely to result in Rs 1 lakh crore of savings for Indian tax payers.

Gupta however added that there is not much expectation of a major impact on staples as a result of the tax relief. "The top 1-2 percent of taxpayers, let's say the top 5 percent, aren't going to start using more shampoos, soaps, or toothpaste. But we might see spending on small discretionary items like a weekend holiday, footwear, apparel, or maybe even a motorcycle," he said.

Another key factor, Gupta notes, is the Reserve Bank of India's shift in monetary policy. "The RBI has allowed the rupee to depreciate slightly and is making strong efforts to inject liquidity into the money markets. Government spending, which had slowed due to elections, is expected to pick up in the coming quarters," Gupta said. However, he added that the benefits may take time to materialize. "We won't see much impact in the March quarter, but from May or June onwards, we should start seeing some effects. The second half of the calendar year is when we might see consumption picking up," he said.

Overall, luxury sectors, including high-end hotels, residential properties, and airlines, are showing some optimism for now.

Gupta noted that the main problem with consumption is job creation and wage growth. "Hiring in IT services, start-ups, manufacturing, and financial services needs to pick up. Without that, consumption will lag," he said.

Other segments in focus

Life insurance companies, however, expressed optimism, believing that the worst of their industry's troubles—COVID-19 claims and regulatory issues—were behind them. They also pointed to India's low insurance penetration as a significant opportunity for growth.

Gupta said that for IT services firms, discretionary spending has not picked up yet but they have seen some relief from the recent rupee depreciation, which could support earnings.

Pharmaceutical companies on the other hand have observed that pricing pressures in the US generics market were easing, though uncertainty lingered due to proposed Trump-era tariffs.

Another segment with optimism was hospitals which have reported a positive demand environment and were not concerned about increased industry capacity.

Capital goods companies also anticipated a modest uptick in government-driven order inflows for FY26 but did not foresee a broad recovery in private capital expenditure.