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A strong El Nino-led summer in 2026 could trigger a cyclical upturn for India's consumer durables sector, particularly cooling products such as air conditioners, air coolers and fans, according to a report by Anand Rathi Research.
The report said an early, intense and prolonged heatwave could sharply accelerate demand for cooling appliances after a weak base in 2025, potentially driving earnings upgrades and margin expansion for sector players. The report noted, "With the IMD forecasts suggesting a high probability of El Nino re-emergence in 2026, the coming summer could mark a decisive cyclical upturn for cooling category." According to the report, a milder summer and erratic weather conditions in April-May 2025 disrupted peak demand last year, leading to slower inventory sell-through and moderation in growth across the sector. However, a stronger summer in 2026 could reverse this trend by boosting secondary sales and improving channel inventory cycles. The report noted that air conditioner demand could exceed expectations if the heatwave sustains, supported by low penetration levels of around 8-10 per cent, impulse buying, replacement demand and deeper penetration in tier-II and tier-III cities. A heat-driven demand cycle may also improve pricing discipline in the industry, allowing companies to pass on higher input costs, such as copper and currency-related pressures, with limited impact on demand. Higher sales of premium and inverter-based models, along with stronger plant utilisation during peak season, could further drive operating leverage and expand margins. The report maintained a constructive outlook for cooling categories, citing the potential for sustained earnings growth and valuation re-rating if heat intensity remains high through the summer months. A prolonged heatwave could accelerate inventory liquidation, strengthen pricing power and improve operating leverage across the sector. It added that stronger peak-season demand, combined with higher night temperatures, could enable companies to pass on recent price hikes linked to higher copper prices, foreign exchange movements and new energy-efficiency regulations. The report concludes that the upcoming summer could become an inflection point for the sector as stronger demand improves return ratios and drives earnings momentum across the cooling ecosystem. (ANI)
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