Festive Season Set to Revive Consumer Spending Amidst Moderation

The consumer discretionary sector is anticipated to see a recovery driven by festive demands despite experiencing moderation in Q1FY26. Urban areas showed weak demand, while Tier 2 and 3 towns outperformed. Value fashion and jewellery segments showed growth, while QSRs faced challenges due to enhanced competition.

The consumer discretionary sector faced continuing moderation in the first quarter of FY26, according to a report by Systematix Research. Despite ongoing weak demand, particularly in urban areas, the sector is hopeful for recovery during the upcoming festive season. The report highlights muted demand in Q1FY26 but anticipates a more favorable environment ahead.

While urban discretionary segments struggled, Tier 2 and Tier 3 towns surpassed expectations. The consumer discretionary category, encompassing companies selling non-essential goods like value fashion, jewellery, and quick-service restaurants (QSRs), displayed varied performance during this period, showing resilience in certain areas despite economic sensitivity.

In value fashions, growth persisted at double-digit rates despite a slowdown from prior quarters, supported by expansion in smaller towns. Nonetheless, early Eid-Ul-Fitr sales partly detracted from this growth. The organised jewellery retail sector showed strong growth, driven by rising wedding demand, Akshaya Tritiya festivities, and increased gold prices. Conversely, the QSR segment saw muted results, with urban markets cutting discretionary spending and heightened competition impacting same-store sales growth. The report remains optimistic for Q2 and Q3 FY26, expecting festive seasons to invigorate key categories.

(With inputs from agencies.)