New Delhi [India], November 4 (ANI): Consumer staples companies in the country saw stable demand trends during the July to September quarter (2QFY26), though overall performance was affected by the GST transition and extended monsoon season, according to a report by Motilal Oswal Financial Services.

The report highlighted that the impact of the GST transition was more significant in personal care products compared to packaged foods.

It stated, 'Consumer: Staples companies witnessed stable demand trends; however, the GST transition and an extended monsoon period weighed on overall performance during the quarter.'

In the packaged foods category, players like Nestle and ITC performed well. Nestle reported an 11 per cent revenue growth, while ITC's FMCG segment also registered healthy growth during the quarter. However, personal care companies struggled to maintain momentum.

Hindustan Unilever Ltd (HUL) witnessed a volume decline of around 2 per cent, while Dabur and Godrej Consumer Products Ltd (GCPL) saw their sales drop by 3-4 per cent.

The decline was largely attributed to GST transition-related disruptions and adjustments in the trade pipeline.

Colgate-Palmolive continued to face challenges, with revenue declining by 6 per cent during the quarter. To offset the GST impact and pass on benefits to consumers, most companies implemented price cuts and increased grammage in low-unit packs (LUPs).

The quick service restaurant (QSR) segment also experienced continued demand weakness despite a low base, indicating that the recovery in discretionary consumption remains uneven.

Motilal Oswal downgraded Dabur from a 'Buy' to 'Neutral' rating, citing sustained weakness in execution, while maintaining ratings for other companies under its coverage.

Overall, the report noted that the second quarter earnings were largely in line with expectations, and the pace of earnings downgrades has moderated.

Although Indian equities have delivered a lackluster performance over the past year, the report emphasized that the markets now appear to be in a healthier state compared to last year.

The earnings cycle is seen as bottoming out, with growth expected to accelerate into double digits in the coming quarters.

The report stated, 'We continue to highlight that the Indian markets now appear to be in a healthy state vs. last year. The earnings cycle is bottoming out, with growth expected to accelerate into double digits'. (ANI)