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According to PL Capital, Paints sector demand remains subdued, with secondary sales declining in single digits’ year-on-year across regions and brands during July and August. Dealers have also indicated that monthly sales targets were missed over the past two months, pointing towards a broader moderation in offtake rather than a one-off disruption.

According to PL Research, the current weakness is largely driven by inventory normalisation following elevated channel stocking over the past two quarters. Strong primary sales during the preceding period were partly supported by inventory build-up across the trade channel. With dealer inventory levels remaining relatively elevated, replenishment has moderated, resulting in softer secondary sales and lower primary offtake.

The research also highlights cautious consumer spending, with discretionary purchases such as painting being deferred amid elevated inflation in key daily-use household essentials. This has further weighed on near-term demand and limited the pace of channel replenishment.

The second half of September is expected to be an important period for the sector, as dealers anticipate an improvement in demand with the onset of festive stocking and an expected pickup in construction activity as the monsoon season tapers off. PL Research notes that the pace and sustainability of any recovery towards the end of September will be critical in determining whether the recent demand softness is temporary or indicative of a more sustained moderation.

The weakness appears broad-based, with channel checks indicating softer secondary sales across brands and regions. Asian Paints and Birla Opus have also witnessed moderation in secondary demand. At the same time, competitive intensity remains elevated across the economy, premium and luxury segments, with Birla Opus and JSW Akzo continuing to gain ground.

On the pricing front, select paint companies have implemented 2–3% price hikes in August, while dealers expect further increases ahead of the festive season if crude prices remain elevated above US$100 per barrel. PL Research also notes that economy-range products are currently outperforming the luxury segment.

The sector continues to face near-term challenges from weak demand visibility, sustained competitive intensity and higher crude and raw-material prices. However, PL Research expects a recovery in demand during the festive period to provide a clearer indication of the sector's trajectory over the coming quarters.

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