India may have had a good monsoon and Central government employees may have got a bonanza in terms of salary arrears thanks to the proposals of the 7th Central Pay Commission (CPC), but they won't reflect in volume growth for consumer companies in the September quarter, says a financial reserves firm.
In its preview of September quarter (2QFY17F) results, Nomura Financial Advisory and Securities (India) Private Limited, or NFASL, said that the spurt in demand because of the twin factors would take some time.
"Expect no positive surprises on volume growth; pricing to return albeit slowly. We expect volume growth to be steady this quarter, similar to levels in 1QFY17, as consumer sentiment remains tepid, and the full effect of a normal monsoon has not set in yet," Manish Jain of NFASL said in a note.
"Therefore, on a sequential basis, we do not expect a significant improvement from 1Q and believe that there may be a decline in the volume trajectory," he added.
The benefits would start accruing in the second half of the current fiscal, reflecting in the topline growth, according to Jain.
"However, normal monsoons after two years of deficient rainfall is a key positive, and along with the recent implementation of the Pay Commission recommendations, we maintain our view that 2HFY17F will see an up-tick in consumption levels," he said.
After two successive years of deficit rainfall (14 percent in 2015 and 12 percent in 2014), the June-September monsoon rains ended with 2 percent deficit, resulting in overall optimism of an uptick in rural demand that drives demand for many sectors, such as automobiles and gold.
The outgo on account of salary arrears for Central government employees and pensioners on account of the recommendations of the 7th CPC is about Rs. 34,600 crore, as estimated by India Ratings.
"The combined outgo for the Centre on account of arrears for January to July and payments for August will total to Rs 346 bn (Rs 34,600 crore)," India Ratings and Research Pvt Ltd. had said in a statement in August.
The BSE Consumer Discretionary Goods and Services index was down 0.35 percent at about 2.04 p.m. on Friday and the NSE Nifty India Consumption index was trading 0.36 percent lower at 3,937.10.
Some of the stocks that are part of these sectoral/thematic indices include TVS Motor, Bajaj Auto, Idea Cellular, Titan, Dabur, ITC, Zee, Asian Paints, Britannia Industries, Emami, Colgate-Palmolive, Jubilant Foodworks, DLF, Ceat, Gitanjali Gems, MRF and Arvind.