The growing wealth gap in India is reflected in the performance of consumer stocks in the stock market, with luxury goods flying off the shelves while everyday goods lag behind. Despite a booming economy, private consumption is expected to grow at just 3%, the slowest in two decades, excluding the COVID-19 pandemic years.
The premium segment, comprising companies that sell high-end products like cars, electronics, watches, and jewelry, is seeing brisk business and soaring share prices. On the other hand, fast-moving consumer goods (FMCG) firms are underperforming, with stocks like Hindustan Unilever posting minimal profit increases and sales slipping.
The cost of living is a major factor affecting consumer spending, with rising prices for staples like vegetables impacting lower-income households. However, consumers in higher income brackets are able to afford big-ticket purchases like jewelry and family holidays.
Foreign investors have been selling off FMCG and consumer durable stocks, while pouring money into Indian stocks overall. The shift towards premium brands is expected to continue in the next decade as incomes increase, with companies in the premium segment seeing higher volume growth compared to those in the mass segment.
Overall, the trend towards premiumization in the consumption space is expected to continue, driven by evolving consumer preferences and changes in lifestyle patterns. Despite economic uncertainties, certain consumer segments are willing to spend more on premium products, leading to a transition in the market.
