India's K-shaped story: Will the script change in 2025?

Premium takes off, while mass market crawls. New Year may not be much different either

- Abhinaba Saha

Beneath the froth and hype of stock markets, one theme stood out for India in 2024—a K-shaped consumption recovery that manifested in the sales of iPhones to affordable homes, with the potential to continue in the new year as well.

While sales of SUVs and opulent homes soared, packaged consumer goods and quick service restaurants drifted, revealing a multi-speed recovery that also reflected on their stock prices. According to experts, the consumer shift to premium will continue in 2025, even as a rural recovery gains steam and weaker sections begin to benefit from government schemes.

Sales of iPhone—once the gadget of choice for the well-heeled—neatly sums up the 2024 consumption story, clocking $10.7 billion in India in the first nine months of the year, with record quarterly shipments in the September quarter. In the same year, the share of affordable housing in total real estate supply fell to 16%.

"Consumption in 2024 and most likely in 2025 will be a tale of parts," Trideep Bhattacharya, president and chief investment officer (CIO) of equities at Edelweiss Mutual Fund, said. "We started the year strongly with robust luxury consumption, and it stayed intact throughout the year. While urban (mass) consumption was a major laggard this year, rural consumption will kick in sometime in 2025."

The contrasting themes played out in the stock market. The Nifty Realty index and the Nifty India Consumption index were two of the top performing sectors of 2024, returning 35% and 34%, respectively. These two sectors were the biggest beneficiaries of "premiumization" as strong demand for premium properties, SUVs, luxury hotels, jewellery and electronic durables boosted the profitability, and hence, profits of many companies, despite sticky inflation and negligible real wage growth.