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24 Nov 2022
Outlook
Staples:
- Volume growth could remain subdued because of a slowdown in rural India and the impact of inflation on consumers
Discretionary:
- Revenge shopping, higher mobility, and opening up of schools and offices can aid strong growth
- Preference for hygienic and well-managed eateries to aid growth in quick-service restaurants
Cigarette, liquor consumption:
- Low base over the last two years and higher mobility might aid growth in cigarette consumption
- Liquor sales could benefit from full occupancies in restaurants in the festive season, and sale of premium liquor
Tailwinds
- Sin sectors (alcohol, cigarettes) may see volume growth after two years of a lull period
- Recent cool-off in commodity prices can aid gross margins of companies going ahead
- Increase in new product launches can aid revenue growth
- There could be an uptick in consumption from rural areas led by better monsoon and higher realisation of crops
Key risks
- Any further wave of COVID-19 infections
- Poor distribution of rainfall could lead to a slower recovery from rural areas
- The demand for health and hygiene products is normalising with COVID-19 waning off, and this can impact the growth rates of a few companies in the segment
(House View aims to regularly provide readers with Kotak Mahindra Mutual Fund’s latest update on various sectors)
The views discussed here are as on end of Sep 2022.
The information contained herein is extracted from KMAMC internal research/different public sources. All reasonable care has been taken to ensure that the information contained herein is not misleading or untrue at the time of publication. This is for the information of the person to whom it is provided without any liability whatsoever on the part of Kotak Mahindra Asset Management Co Ltd or any associated companies or any employee thereof. Investors may consult their financial experts before making any investment decision.
The article includes statements/opinions which contain words or phrases such as "will", "believe", "expect" and similar expressions or variations of such expressions, that are forward-looking statements. Actual results may differ materially from those suggested by the forward looking statements due to risk or uncertainties associated with the statements mentioned with respect to but not limited to exposure to market risks, general and exposure to market risks, general economic and political conditions in India and other countries globally, which have an impact on investments, the monetary and interest policies of India, inflation, deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices etc. Past performance may or may not be sustained in future.
This is not intended for distribution or use by any person in any jurisdiction where such distribution would be contrary to local law or regulation. The distribution of it, in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of this material are required to inform themselves about, and to observe, any such restrictions. The sector(s) referred, should not be construed as any kind of recommendation and are for general information only.
