Consumer goods companies are expecting a stable FY26 for raw materials and a recovery in margins starting from the second quarter, according to a report by Nuvama.
The report said that the majority of fast-moving consumer goods (FMCG) players have delivered multi-quarter high revenue and volume growth, supported by strong demand trends.
It stated “All staples companies have highlighted of a stable FY26 for raw materials and margins to improve Q2 onwards”. The report stated that the urban demand has shown clear signs of recovery, driven by higher disposable income after Reserve Bank of India’s (RBI) rate cuts and consumer inflation falling to an 8-year low.
Urban general trade, which had been weak for a few quarters, has now turned around and is showing growth. Rural demand, too, remains robust, supported by a strong monsoon season and a healthy crop output.
The report highlighted that all major staples companies see FY26 as stable on the raw materials front, and expect margins to start improving from the second quarter onwards.
Margin pressure, which had been a concern in the previous quarters, is believed to have bottomed out in Q1. Going ahead, margin expansion is expected as raw material correction benefits begin to flow through from Q2.
During the first quarter, earnings before interest, tax, depreciation and amortisation (EBITDA) growth lagged because companies were still holding high-priced raw material inventory and also faced some volatility in raw material prices.
However, with raw material prices stabilising, the benefits are expected to support profitability in the coming quarters. On the consumption side, FMCG companies reported an improvement in topline performance, but margins remained under pressure. In contrast, discretionary consumption witnessed a broad-based slowdown, with the consumer durables segment being the worst affected.
According to the report, measures such as income tax cuts and GST rate reductions could provide some support to demand in this category going ahead.
Within consumer durables, there were some positive highlights. C&W (Consumer & White goods) companies reported healthy growth on the back of strong demand across sectors, supported by robust volume growth. Capital expenditure of C&W companies also remains on track, with new projects expected to be commissioned in the coming months.
The solar products category saw strong traction, with companies expanding into adjacent categories to meet rising consumer demand. At the same time, the premiumisation trend continued across categories, with companies focusing on higher-value products to improve margins.
Overall, the report suggests that while Q1 faced margin pressures due to raw material costs, the outlook for FY26 remains stable, with a likely recovery in margins from the second quarter and steady growth in both urban and rural demand.
(This report has been published as part of the auto-generated syndicate wire feed. Apart from the headline, no editing has been done in the copy by ABP Live.)
