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No One Can Eat Just One 🥤

It was one more week dominated by inflation. Consumer prices in the US were up 8.2%, slightly lower than the previous month, but still above expectations, and way above for Fed’s comfort. But inflation isn't really stopping consumers in the US.


Consumer spending ticked up despite higher interest rates and higher prices. Delta Air Lines and American Airlines both reported strong sales despite fares that are off the roof. Pepsi reported 9% revenue growth as people continued munching on Cheetos and Lay’s.


But here’s the thing - India is showing similar trends. There’s no stopping or slowing consumption, despite higher interest rates, and high inflation.


Last week, India’s inflation data came in at 7.4% for September, and that’s likely to result in another rate hike by the RBI. And here in India too, there are no brakes on consumption.

  • The latest CMIE Consumer Pyramids Household Survey shows, during September, the index of consumer sentiments rose to a 30-month high

  • The recent Redseer 2022 E-commerce Festive Sales report showed that the online retail market touched US$ 5.7 billion in GMV (Gross Merchandise Value), which is higher than last year by 27%, during the first week of the festive season

  • The Federation of Automobile Dealers Associations (FADA) reported that automobile sales were up 27% this Navratri, compared to the previous year

  • IMF forecasted a GDP growth rate of 6.8% for India, saying consumption will continue to be the mainstay of Indian growth

Also, take a look at all the FMCG stocks! They’ve outperformed other indices. YTD:

  • Nifty 50: -1%

  • Nifty FMCG: +15%

One would imagine inflation being a double whammy for them - a demand-led hit on revenues, and a cost-led hit on margins. Yet, here we are, consuming like nothing’s wrong!


💡 Our View: We continue to be cautious about Indian equities in the near term. Sticky inflation and economies not slowing down enough are fuel for central banks to further tighten screws. That said, we’d be buyers on dips given that the long-term appears exceptionally solid.


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