Rural optimism rises on monsoon hopes, but urban demand sluggish: Equirus report

Equirus Securities' latest ground check report reveals a mixed demand environment across sectors, with rural India showing resilience bolstered by monsoon optimism, while urban consumption remains under pressure.

Rural demand, particularly in fast-moving consumer goods (FMCG), is beginning to show signs of recovery, outpacing urban markets, according to the report. Meanwhile, electric two-wheelers (E2Ws), real estate pre-sales, and select consumer durables like washing machines and cables have emerged as bright spots amid otherwise subdued sectoral trends.

Two-wheeler demand saw a post-wedding season dip, although TVS Motors and Royal Enfield continued to outperform, aided by base effects and popular models, the report said. Notably, electric two-wheeler (E2W) registrations grew 25% year-on-year, with players like TVS, Hero, and Bajaj recording strong momentum. However, Ola Electric saw a sharp 56% decline in June YoY registrations.

In the passenger vehicle segment, demand remains sluggish due to high ownership costs and limited new launches, said Equirus Securities. While Maruti Suzuki and Tata Motors are grappling with weak sales, Mahindra & Mahindra is bucking the trend with new launches and stronger EV interest, it noted.

Construction-linked materials, including ceramics and plastic pipes, witnessed continued demand weakness, exacerbated by early monsoon rains and regulatory overhangs, the report said. Cement demand dropped significantly, particularly in June, due to both seasonal disruptions and payment delays at the dealer level.

Sales of air conditioners and coolers fell sharply due to unseasonal rains and milder temperatures, the report showed. In contrast, washing machines showed double-digit growth in May, and cables outperformed wires thanks to infrastructure demand.

Rural FMCG demand remained robust, particularly in oral care and detergents, despite inflation-driven price hikes, said Equirus. Urban areas, however, exhibited cautious discretionary spending. Campa Cola’s aggressive retail push is reportedly gaining ground, especially in Tier 2 and 3 towns, the report said. Meanwhile, personal care categories like hair oil and soaps were impacted by erratic monsoon patterns and rising input costs.

Real estate pre-sales are strong in key markets like NCR and Bengaluru, while Mumbai continues to lag due to regulatory bottlenecks, the report noted.

The report warned of continued weakness in auto (excluding E2W), building materials, and consumer durables in the near term. A broader recovery is expected with the onset of the festive season in late August, it said.