The outbreak of IL&FS crisis in September 2018 and the subsequent liquidity squeeze in the system derailed the growth story of various sectors of the economy. While the auto industry continues to move in reverse gear, other consumption-related sectors such as consumer staples and FMCG (fast moving consumer goods) also seems to be in the limbo owing to an array of headwinds.

The near-term outlook, too, looks gloomy for the entire consumption theme, though things are likely to change for better in the second half of the fiscal year 2020 (H2FY2020), analysts say. A normal monsoon and a consumer-centric Budget in July would act as a catalyst for consumption revival, they believe.


That apart, accommodative stance of the Reserve Bank of India (RBI) and the possibility of a cut in interest rates and its transmission is the other ingredient that can spur growth over the medium-to-long term.

“The rural economy is reeling under a crisis. Rural wage growth has been quite weak and low agricultural prices have taken a toll on farmers’ incomes. We think spending should be prioritised in rural and affordable housing given the high stress in these sectors,” said Aditya Narain, head of research, institutional equities at Edelweiss in a pre-budget note.

A clear evidence of the economic slowdown is visible in the auto sales since the past few months. Combined sales of top six passenger vehicle makers dropped 16.3 per cent to 206,115 units in June 2019, as compared to the June 2018, data show. Similarly, the fast moving consumer goods (FMCG) sector has also been impacted with sales remaining muted for most players in the March 2019 quarter (Q4FY19).

At the bourses, stocks of both these sectors have underperformed. On a YTD (year-to-date) basis, the Nifty Auto index has slipped 13 per cent, while the Nifty FMCG index has slipped 3 per cent, ACE Equity data show. In comparison, S&P BSE Sensex and the Nifty50 have gained around nine per cent each during ................................BS