India’s FMCG sector is expected to see a demand rebound in early FY26, supported by a revival in rural consumption and easing inflation, as per a report by ShriRam Mutual Fund. The consumer durables segment also shows growth potential, particularly in premium cooling products. However, rising raw material costs may pose challenges to profit margins. At the same time, equity markets are experiencing heightened volatility due to global trade tensions.
India’s fast-moving consumer goods (FMCG) sector is poised to witness a revival in demand in the first half of the financial year 2025-26 (H1FY26), as per a recent report released by ShriRam Mutual Fund. The resurgence is expected to be driven by improving rural consumption trends, a decline in inflationary pressures, and strategic pricing measures undertaken by companies.
After a period marked by uneven performance and macroeconomic headwinds, the FMCG segment is gearing up for a more favorable business environment. The report stated, “FMCG is poised for a demand rebound in H1FY26, aided by rural recovery, softening inflation, and supportive pricing.”
A key factor supporting the expected recovery is the improvement in rural demand, which had slowed down in previous quarters due to high food inflation and income pressures. However, with inflation now easing and better rainfall forecasts bolstering rural income prospects, consumption in non-urban markets is showing signs of revival.
Companies in the FMCG space are also adopting more calibrated pricing strategies, offering value packs and promotional pricing to stimulate demand. These measures, along with stabilizing input costs, are helping restore consumer confidence. Urban demand, which remained relatively steady throughout the downturn, is also expected to gain momentum. Categories like packaged foods, personal care, and beverages are likely to benefit the most from this renewed consumption wave.
While the FMCG sector readies itself for a near-term rebound, the consumer durables sector continues to reflect a long-term growth narrative, albeit with some immediate challenges. The ShriRam Mutual Fund report noted that demand for premium products and rising temperatures have boosted sales in categories like fans and cooling appliances, especially in the northern parts of the country.
However, not all sub-segments are performing equally. Electrical consumer durables (ECD) and room air conditioners (RACs) are facing hurdles in the form of elevated raw material costs and limited ability to pass on these costs to end consumers. As a result, margins in the RAC segment remain under pressure. The report cautioned, “High raw material costs and limited pricing power may pressure RAC margins.” Additionally, the delay in the onset of summer in southern India temporarily affected the seasonal sales cycle, though demand in northern regions is picking up.
The report also touched upon market dynamics affecting the performance of FMCG and consumer durable stocks. Rising global trade tensions, particularly concerns over tariffs imposed by the United States, have led to increased volatility in domestic equity markets. This global uncertainty has spilled over into Indian financial markets, contributing to fluctuations in investor sentiment. Despite these headwinds, both FMCG and consumer durable sectors delivered notable gains over the past month. The Nifty FMCG index rose by 5.33%, while the Nifty Consumer Durables index climbed 4.06%, reflecting optimism around improving demand and relatively stable input costs.
However, the medium-term picture appears more measured. Over the last three months, Nifty Consumer Durables gained a modest 1.09%, while Nifty FMCG increased by 1.60%. This tempered growth reflects investor caution, particularly about the pace of rural recovery and the potential impact of macroeconomic risks. Over the six-month period, both indices registered declines — Nifty FMCG fell by 5.53%, and Nifty Consumer Durables declined by 6.30%. These figures suggest that elevated interest rates and inflation may have constrained consumer spending during that timeframe.
Looking at the long-term perspective, consumer durables continue to inspire greater investor confidence compared to FMCG. Over the past year, Nifty Consumer Durables posted a 7.13% gain, outpacing the 4.06% rise in Nifty FMCG. This outperformance underscores the durability of India’s aspirational consumption story, supported by rising incomes, urbanization, and greater demand for home appliances and lifestyle products.
The ShriRam Mutual Fund report paints a cautiously optimistic picture for India’s consumer-driven sectors. While the FMCG industry is gearing up for a short-term rebound in H1FY26, the consumer durables sector continues to exhibit strong long-term potential despite near-term margin pressures. Both sectors will remain key indicators of India’s consumption resilience amid global uncertainties and evolving domestic dynamics.
