FMCG recovery real but modest, banking margins face pressure, power sector demand unstoppable: Anand Tandon

As India's quarterly earnings season enters its final stretch, independent analyst Anand Tandon says the results so far tell a story of steady but unspectacular recovery - with a few sectors walking a finer line than headline numbers suggest.

FMCG: rural tailwind, but don't call it a boom

• Rural demand improving
• Single-digit volume growth
• Commodity pass-through uncertain

The fast-moving consumer goods sector has had a better quarter than the past two years would suggest, but Tandon urges investors not to overread it. He attributes the uptick primarily to rural India finally pulling its weight — a trend visible across auto and other consumption categories as well.

So long as you are willing to live with single-digit to mild double-digit topline growth and similar bottom line growth, this is a sector that will perform steadily from here.

-Anand Tandon, Independent Analyst

The structural ceiling for FMCG remains what it has always been: volume growth is inherently limited to single digits, with companies layering on whatever pricing power commodity costs allow. Tandon says the two variables to watch closely are forward commodity prices and how much of any cost inflation companies can pass on to consumers without hurting volumes. For now, margins are holding — but the sustainability of that balance will define the sector's trajectory through the rest of the year.

PSU banks: peak health, but NIMs under quiet pressure

On the banking sector, Tandon is broadly constructive but points to a stress point that could emerge in the coming quarters. Balance sheets, he notes, are as clean as they have been in a very long time; capital adequacy is high, credit growth has resumed, and asset quality concerns have largely faded.

The challenge ahead is net interest margins. With competition for deposits intensifying and CASA ratios shrinking, banks are having to work harder to fund their loan books. If the RBI keeps lending rates anchored, the squeeze on margins could become more visible. For now, the numbers look healthy — but the easy phase of the recovery cycle may be behind the sector.

Power and EMS: demand is certain, margins are not

• Transmission & distribution capex
• Strong ROEs
• Raw material cost risk
• Rising competition

The power equipment and electrical manufacturing services space is one area where Tandon sees no demand problem whatsoever. India's power load has already hit levels that were not projected until 2030, which means the investment pipeline for transmission, distribution, cables, and related infrastructure is both large and urgent.

That said, he tempers the enthusiasm on margins. Despite strong return on equity figures across the space, the sector is not particularly margin-rich — which he finds surprising, given it should attract more competition. Larger industrial players are now entering, which could add supply-side pressure over time. More critically, raw material costs remain outside the control of manufacturers, and any sharp move there could slow the earnings momentum even as order books stay full.

The bottom line across all three sectors, in Tandon's reading, is one of steady rather than spectacular — solid fundamentals with specific, watchable risks that investors should not ignore behind strong headline prints.