New Delhi [India], September 16 (ANI): Consumer companies are expected to report improved performance in the second half of the current financial year, aided by festive season demand and the benefits of Goods and Services Tax (GST) reforms, Systematix Research said in a report.

The report noted that consumer staples have shown modest growth, while discretionary spending continues to lag pre-COVID trends.

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Results for the first quarter of FY26 were muted, but sequential improvements are already visible. Easing inflation, normalising supply chains, and upcoming festive demand are expected to drive recovery in the second half.

It stated "1QFY26 consumer company results were muted, but sequential improvements and festive season demand are expected to drive recovery in 2H FY26, aided by GST reforms".

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Consumer staples companies reported revenue growth of 6.5 per cent year-on-year in 1QFY26, with volume growth of 3.5 per cent year-on-year. Both indicators were slightly higher sequentially.

Urban demand showed signs of recovery, while rural demand remained steady. Adverse seasonality, however, weighed on categories such as juices, aerated drinks, ice creams, dairy, sun and skin care products, and paints.

The report said volume demand is expected to improve in 2H FY26 due to easing inflation and wider distribution. Food and beverages may also benefit from potential GST rate cuts.

Rural demand, however, remains fragile, the report shared that the recovery in rural markets is driven more by disinflation than income growth, with households continuing to depend on government transfers.

Declining savings, rising food expenditure, and increasing informal borrowing add to the pressure. A strong monsoon has boosted agricultural output, but low crop prices are limiting farm incomes.

Rural consumer confidence has seen a slight improvement, while urban confidence remains pessimistic. Nonetheless, non-essential spending in cities is beginning to revive, which could support overall sector recovery in the second half of the year. (ANI)

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