NEW DELHI/BANGALORE -- K.J. Singh , a former army officer, had been closely tracking the high-end car market for close to two years. Finally, he bought his dream car, a BMW 520D, last month.
"I felt this was an opportune moment for me to buy it since I was getting the best deal possible," said the 55-year-old Singh, an executive director at a New Delhi-based real-estate company, which he declined to name.
Consumers like Singh account for the change reflected in the consumer confidence index across the top metros, which shows a significant improvement. It is up 3.4 points from 38 in January to 41.4 in May, according to BluFin Advisors Pvt. Ltd, which provides financial information.
BluFin attributes the change in sentiment to several factors, including lower pessimism about inflation, coupled with rising expectation of a further decline in interest rates in the next 12 months. The prospects of a good monsoon is further boosting the sentiment and will augment consumer demand, suggest different consumer confidence reports.
Spending on discretionary items are on an upswing, according to Debopam Chaudhuri, vice-president of research at BluFin. Consumers are gradually becoming more comfortable with the inflationary situation, compared with last year, and expect rate cuts in the near future. Among purchases, the willingness to buy new homes topped the list.
The latest numbers are a respite from the rather dismal scenario six months ago. Blufin's index for January, for instance, fell 1.8 points to 38 from 39.8 in December 2012, indicating growing pessimism among Indian consumers. Data at that time revealed weak sentiment about future employment with resultant expectations of lower household income contributing to the decline.
Consumers across North India, sensitive towards economic variables such as interest rate movements, inflation and employment, saw a rise of about 2 points in confidence in May. The trend will replicate in other geographies gradually, Chaudhuri said.
The survey has shown consumers in eastern India to be the most pessimistic, while those in the southern states are the most optimistic.
A report by research firm Ipsos, titled Economic Pulse of the World and released on Tuesday, showed India's economic confidence had increased by three percentage points to 66% in May, compared with the preceding month on expectation of a good monsoon.
"In India, monsoon is key to determine agricultural output, inflation, consumer spending and overall economic growth. A stronger economic outlook can lift sentiment in equity markets, mainly of companies selling products in rural areas, including consumer goods and automobiles", said Mick Gordon, chief executive officer of Ipsos.
Consumer durable companies are seeing some relief already. Kamal Nandi, vice-president, sales and marketing at consumer durables firm Godrej Appliances, for instance, reports a steady volume growth in some product categories.
"Sales over the last two months are reflective of greater purchasing intent by the end-consumer, especially, in the category of cooling products, where the industry has seen a growth of over 10%," he said.
The retail sector saw a strong take-off, too, in April and May. "These two months saw tremendous response driven by the wedding season across North India and other geographies," said Jacob John, brand head, Louis Philippe at Madura Fashion and Lifestyle, a division of Aditya Birla Nuvo Ltd.
John was bullish although growth in India's organized retail market slowed to 10% in 2012-13, from an average 20% seen during 2009-10 to 2011-12, according to a recent note by ratings agency Crisil Ltd.
However, this growth is expected to pick up and remain moderate at about 14-15% over the next two years to March 2015).
Prospects of a strong monsoon will further spur demand. According to Chitranjan Dar, divisional chief executive, foods business, at ITC Ltd, "demand has been improving".
But analysts and industry experts are not reading too much into the numbers.
The little boost in numbers has come after a recent fall on commodity costs, including retail petrol prices, according to Nitin Mathur, consumer research analyst at brokerage firm Espirito Santo Securities. However, "macro-economic environment remains tough and we won't be surprised to see this confidence tapering off," he said, adding that heavy offers given by consumer companies drove sales for the period.
Samar Singh Sheikhawat, senior vice-president, marketing, at United Breweries Ltd, the maker of Kingfisher beer, agreed.
"We haven't seen any major improvement in consumer sentiment. The summer is a seasonally strong period for us and it's business as usual this year. At such a time when demand is already strong, it's very hard to say whether consumer sentiment has improved," Sheikhawat said.
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