Indians grow up hearing that Diwali is about new beginnings, a festival of lights that encourages moving on from the past. For India Inc., this sentiment couldn’t be more relevant this year.
The season of hope has returned just in time for businesses, following three challenging months weighed down by sluggish consumer spending, weak demand, rising inflation, and a monsoon that overstayed its welcome. As Diwali approaches — the pinnacle of the festive season that began on September 15 — companies are looking forward to a fresh start, holding onto the hope of a revival and the prospect of brighter days ahead.
However, industries from FMCG to automobiles had anticipated what’s coming and were already prepared to approach the season with caution. So much so that India Inc. reported a sharp deceleration in revenue growth for the quarter ended September 30, the slowest pace in the past 16 quarters, according to a report by CRISIL.
For retail investors, the festive season has also brought a difficult reality. October alone saw Nifty drop nearly 6 per cent, while Sensex shed over 4,800 points, marking the worst pre-Diwali phase for investors in the past decade. Historically, Nifty’s pre-Diwali returns have shown positive averages, yet this year the index appears set to surpass the steep 4.45 per cent fall of 2015. With consensus on Nifty earnings growth staying in the low double digits, the market remains vulnerable if earnings fall short.
As Indian businesses grapple with slower revenue growth of 5-7 per cent, several sectors have been especially impacted including construction, industrial commodities, agriculture and investment-linked sectors.
In contrast, consumer discretionary and staple products and services sectors, which includes two-wheelers, textiles and telecom among others, showed stronger performance, posting a 15 per cent revenue growth that helped counterbalance some of the pressures facing other industries.
Diwali and small towns to save the day?
With earnings under pressure and inflation hitting consumers’ pockets, FMCG and retail companies are looking to Diwali as a lifeline for recovery. While high prices have hurt sales and profits in both cities and rural areas, demand is beginning to pick up as the festive season reaches its peak.Even the Reserve Bank of India (RBI) noted a slowdown in some economic indicators but expressed hope for a festive boost, especially in smaller towns where spending is rising. It expects the overall demand to recover from the temporary slowdown experienced in the second quarter of 2024-25, as festive season demand gains momentum and consumer confidence rises.
The e-comm push
Meanwhile, to tackle these challenges, companies are shifting focus to smaller cities and towns where incomes are growing, helping to balance out inflation’s impact. Many FMCG brands are also turning to fast delivery services and online platforms to meet the festive demand, while some are cutting costs by streamlining supply chains and sourcing locally.
Moreover, e-commerce has surged this festive season, with online marketplaces selling nearly ₹55,000 crore worth of goods in just one week—a 26 per cent jump over last year. Mobile phones, electronics, consumer durables, and home merchandise drove the majority of sales, with consumers from smaller cities increasingly making higher-value purchases and using EMI options to manage costs.
Major e-commerce players like Flipkart, Amazon India, and Meesho report robust sales from smaller regions, with tier-II and tier-III cities accounting for over 70% of smartphone and TV sales.
Festive fever grips India
As the festive season unfolds across the country, companies are gearing up to tap into the surge in consumer demand that typically accompanies this time of year. From automotive giants like Maruti Suzuki to FMCG leaders like Marico, businesses are reporting optimism and robust sales figures, signaling a potential turnaround after a challenging few months.
Maruti Suzuki, India’s largest car manufacturer, has reported positive retail sales this festive season, with nearly 300,000 units sold, reflecting a 14% year-on-year growth compared to the same period last year, spanning from the end of Shraadh to Diwali.
In anticipation of significant sales on Dhanteras, the company ramped up deliveries, delivering approximately 30,000 units on the auspicious day and expecting an additional 10,000 units to follow, as noted by Partho Banerjee, Senior Executive Officer of Marketing & Sales at Maruti Suzuki India.
Kia India also reported strong performance, delivering around 6,000 cars on Dhanteras. Meanwhile, JSW MG Motor India made headlines with the delivery of over 100 electric vehicles in a single day in the Delhi-NCR region.
Tata Motors projected a total of 15,000 units to be delivered, while Mercedes-Benz recorded a notable 10% growth in Dhanteras sales.
Marico is optimistic about the upcoming festive season, expecting encouraging demand trends due to the above-normal monsoon, government budget allocations aimed at boosting the rural economy, and the general festive spirit.
“Amidst the backdrop of improving macro-indicators, we expect a gradual uptick in the growth of our core categories in the domestic business through the ongoing initiatives to enhance the profitability of our General Trade (GT) channel partners and transformative expansion in our direct reach footprint under Project SETU,” the FMCG major said in its Q2 earnings.
However, despite the Diwali Dhamaka, urban kirana stores face significant challenges as quick commerce platforms continue to gain traction. General trade distributors have reported a 25-30% month-on-month drop in sales since July, driven by changing consumer shopping habits in cities, as reported by ET on October 25.
Nonetheless, after a troublesome second quarter, quick commerce services like Zomato-owned Blinkit, Swiggy Instamart, Zepto, and Big Basket might only be a blessing in disguise for most FMCGs as these 10-minute delivery services are capturing a growing share of the market at a rather rapid pace.
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