FMCG Sector: Gradual recovery in store
FMCG
companies have witnessed a challenging year in FY16 with volume growth
moderating significantly owing to – a) sluggish rural demand led by low
MSP, low rural
spending by government and two consecutive weak monsoons &
unseasonal rainfall, b) tepid urban recovery, c) pricing headwinds in
select categories, and d) weak macros and consumer sentiment.
As
we have entered into FY17E, we expect a significant improvement in the
growth trajectory for companies and value growth to start becoming
apparent. We expect
gradual recovery in H2FY17 on the back of seventh pay commission, OROP
(One Rank and One Pension), the FY17 budget increased spending on rural
employment schemes to Rs380bn and higher disposable income on account of
normal monsoon, the numbers will improve
significantly, for sure. Implementation of GST is also expected to have
a wide-ranging positive impact.
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