Indian Retail Sector Outlook: The impact of the West Asian conflict has extended far beyond a single industry. The ongoing US–Iran tensions have created ripple effects across multiple sectors, including automobiles, banking, and others. Among the affected sectors, the Indian retail industry has also experienced noticeable disruptions, with the possibility of a prolonged impact in the coming quarters.
The retail sector, being a key component of the broader consumer durables industry, reflects these challenges. While the Nifty Consumer Durables index has shown signs of short-term recovery, the longer-term outlook remains subdued. Over the past six months, the index has declined by more than 10 per cent, highlighting underlying weakness despite intermittent rebounds.
Goldman Sachs on Retail Sector
Talking about the outlook of the Indian retail sector, Goldman Sachs notes that demand in the fourth quarter remained stable to slightly improved compared to the third quarter, suggesting that year-on-year sales growth is likely to be similar or marginally higher.
However, inflationary risks are expected to rise heading into the first half of FY27, which could weigh on discretionary consumption and impact overall demand.
On the cost front, there is emerging pressure from rising crude-linked input prices. Key materials such as polyester, polyurethane (PU), and ethylene-vinyl acetate (EVA) have seen an uptick, indicating potential margin compression beginning in the first quarter of FY27.
Goldman Sachs’ Stock-Specific View
Strong Pricing Power
Goldman Sachs prefers Metro Brands, citing its premium positioning and stronger ability to pass on rising costs to consumers. The stock was trading 1.4 per cent higher at Rs 951.05.
Additionally, the stock has risen over 6 per cent in the last week, while weakness is seen over the one-month and one-year time frames. However, long-term returns remain strong.
Benefiting from Price Hikes
Page Industries is also expected to benefit from an approximate 2 per cent price hike, with the full impact likely to be reflected from 1QFY27. The shares of this company were trading 1.7 per cent higher at Rs 34,525.
This stock has risen over 8.5 per cent in one week and over 9 per cent in the last month, reflecting solid short-term gains. However, in the medium term, the stock remains under pressure. But the long-term trend remains strong.
Growth with Margin Concerns
In contrast, Trent may face constraints due to limited pricing power in the value segment, particularly in its Zudio format. The stock was trading at Rs 3,796.80, up nearly 7 per cent. The stock was in the green for the one-week and one-month time frames.
Goldman Sachs has reiterated its Neutral rating on Trent, setting a target price of Rs 4,080, slightly lower than its previous estimate of Rs 4,110. Despite this minor revision, the brokerage sees a potential upside of 15.5 per cent from the current price.
According to the brokerage, the company’s revenue could surge, but profits could remain under pressure due to raw material inflation.
Weak Positioning
Meanwhile, Goldman Sachs maintains a Sell rating on Bata India, citing weaker competitive positioning and rising cost pressures. Bata India’s stock performance remains weak overall, despite a short-term rebound. Gains of 12.66 per cent in one week contrast with steep declines across longer periods, reflecting sustained pressure and weak investor sentiment.
(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money-related decisions.)
