Will the wave of inflation affect retail stocks?

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After being shut down for two years in offline retail stores by Covid-19, consumers are now returning to the malls and standalone shops. This is despite the fact that goods are becoming more expensive due to inflation.


Though the pandemic drove a new trend of digital-centric customer, a recent report by BCG-RAI indicated that India’s consumption surpassed pre-pandemic growth levels of 17 per cent.





As mobility improves, malls have seen an increase in footfall in lower-tier cities.


Now, with retailers ramping up their expansion plans in FY23, analysts expect the same-store-sales-growth figures to improve in the first half of the ongoing fiscal.


Speak to Business Standard, VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, says sharp rebound in India’s GDP augurs well for retail. Retail stocks are a good investment for the long-term, as urban consumption is increasing in metros and urban areas. Avenue Supermarts is a good buy, he states.


Indian retail companies have been increasing prices in an effort to counter rising inflation and higher freight and power cost costs.


Jubilant Foods, Westlife Developments, V-Mart Retails Barbeque Nation, Devyani International and Westlife Development all increased prices between 6 and 11 percent in April 2022.


Analysts expect that consumer spending will rebound in the short-term due to lower commodity prices and this combination.


Nishit Master is the Portfolio Manager at Axis Securities. He believes shifts in consumer preferences are a positive thing for retail and that spending will not slow down anytime soon. He says that ABFRL, Trent and V-Mart Retail stocks offer attractive options.


The retail stocks on the bourses have been mixed in the past six month.


Stocks like V-Mart Retail and Jubilant Foodworks saw a drop of 33 percent, while Shoppers Stop, Trent, and Metro Brands saw a rise of 56 percent.


In comparison, both Nifty50 and the S&P BSE Sensex tanked over 10 per cent during the period.


Meanwhile, this week, India’s macro data will steer Investors monitor wholesale and retail inflation data June.


Besides, HCL Tech, Mindtree, L&T Infotech and HDFC Bank will be among the key companies slated to report their Q1FY23 numbers this week.


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