Will The Q4 Retail Rush Last?

India’s Q4 Retail Surge Was Strong. But Will It Last?

By Pritha Pahari

It was a strong quarter for India's retailers — busy stores, rising sales, and fresh outlets opening daily, but with fuel costs climbing, inflation and household budgets tightening, the question now is whether the momentum will last.

Between January and March 2026, stores were busy, sales were up, and new outlets were opening almost every day. Lower taxes made clothes and daily essentials cheaper, an unusually packed wedding season flooded markets with spending, and brands offered some of the steepest discounts in years to clear unsold winter stock. The result was a quarter that surprised even the optimists.

The numbers backed it up. DMart posted 19% revenue growth, up sharply from 13.2% in Q3, with same-store sales growth improving to 10%. V-Mart reported 24% revenue growth alongside 12% same-store sales growth. Trent saw operating EBITDA rise 43%.

What Drove The Surge?

DMart alone added 58 stores in Q4 compared to just 10 in Q3. Trent's Zudio more than doubled its pace, going from 48 store openings in Q3 to 109 in Q4, mostly in Tier II and Tier III cities where organised retail remains underpenetrated.

Much of the Q4 growth came from new stores rather than existing ones doing more business. Sandeep Abhange, Research Analyst at LKP Securities, urges caution in reading the results. "The relatively stronger Q4 performance was largely driven by continued store expansion and better execution at the supply chain level rather than any meaningful uptick in consumer sentiment or festive spillover," he said.

The Changing Consumer Behaviour

The bigger concern is what is happening to the Indian consumer. Food and grocery grew 14% year-on-year. Apparel grew 13%. But consumer durables grew just 1%, reflecting weak appetite for big-ticket purchases.

Rural markets continue to outperform urban ones. And FMCG value growth has consistently run ahead of volume growth, meaning people are spending more but buying less. India's retail market is quietly splitting into two: value formats and premium categories are both doing well, while the middle is getting squeezed.

What’s Next?

"The Q4 surge itself is largely cyclical, driven by GST timing, an unusually dense wedding calendar, delayed winter inventory clearance, and a favourable base, factors unlikely to repeat in the same combination," said Vinit Bolinjkar, Head of Equity Research at Ventura Securities.

Inflation is the biggest wildcard going forward. Leading FMCG companies are already signalling price hikes due to rising crude costs and global supply chain pressures.

For middle-class households already stretched by high urban living costs, another round of price increases could quickly undo Q4's fragile gains. The quarter was strong. What comes next will be the real test. 

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Rs 96.53

That’s where the rupee closed on Tuesday, extending its losing streak to eight straight sessions and hitting a fresh record low against the US dollar. Reuters reported that rising oil prices, mounting external financing pressures, and higher US Treasury yields continue to drag down the Indian currency.

Backdrop: Brent crude prices have jumped more than 50% since the Iran conflict escalated in February, sharply increasing India’s import bill and widening concerns around the country’s current account deficit. India’s merchandise trade deficit widened to $28.38 billion in April as crude imports surged amid disruptions around the Strait of Hormuz.

Rising US Treasury yields have strengthened the dollar globally, while foreign investors have pulled more than $23 billion from Indian markets since March. Economists now expect India to post a third straight year of balance-of-payments deficits if oil prices remain elevated.

Outlook: Analysts expect the rupee to remain under pressure unless geopolitical tensions ease and foreign capital flows stabilise.

Fuel Squeeze From Sky To Street

India's airlines, including Air India, IndiGo and SpiceJet, have asked state-run oil refiners to hold off on hiking aviation turbine fuel prices for domestic flights until the West Asia conflict ends, Bloomberg reported.

State refiners, currently selling jet fuel for domestic flights at around Rs 1.05 lakh per kilolitre while incurring losses of Rs 92,000 per kilolitre, are considering a possible hike of up to 25% for June. A decision is expected before June 1.

Critical Moment: Commercial vehicle drivers' unions in Delhi have announced a three-day strike from May 21–23, protesting rising fuel costs and stagnant taxi fares unchanged for nearly 15 years, with unions also targeting alleged exploitation by app-based aggregators such as Ola, Uber and Rapido.

Future: Adding to the pressure, rating agency Crisil has warned that India's crude oil trade deficit is set to widen sharply this fiscal, with Brent crude expected to average $90–95 per barrel in FY2027 against $70.3 last fiscal. It has forecast India's current account deficit rising to 2.2% of GDP from an estimated 0.8% last fiscal.

Separately, the government has notified ethanol blend standards up to E30, advancing its biofuels programme beyond the existing E20 mandate as it looks to cut crude oil imports.

OMC’s Lose Despite Price Hikes

Indian Oil Corporation (IOC) is now losing Rs 617 on every LPG cylinder it sells, up from Rs 171 in April and Rs 100 in the January–March quarter, as the Iran war squeezes supply through the Strait of Hormuz, finance chief Anuj Jain said Tuesday, according to a Reuters report. Across petrol, diesel, and LPG combined, ICRA estimates OMCs are still losing around Rs 500 crore per day even after the recent fuel price hike, a level it calls unsustainable.

Overview: Per-unit losses after the hike stand at roughly Rs 7.5 per litre on diesel and Rs 3.2 per litre on petrol. IOC has responded by overhauling its supply chain, diversifying crude and LPG sourcing, buying LNG from Oman, Nigeria, Angola, and Indonesia after Middle Eastern suppliers declared force majeure, and running refineries at full capacity.

"From the point of view of elevated prices of crude oil, this is a very modest increase in prices," Prashant Vashisht, senior VP at ICRA Ratings, told The Core Report. "At some point, if the geopolitical situation drags on, the OMCs would have to relook at prices."

Forecast: India imports about 60% of its LPG needs, with 90% of those supplies historically routed through the now-disrupted Hormuz Strait. ICRA has warned that unless crude prices correct meaningfully, OMC financials will remain under severe pressure.

Necessary But Not Sufficient

Amid a falling rupee and rising fuel prices, and a war in West Asia that sees no resolution, the austerity measures by the Indian government are “necessary but not sufficient,” Kotak Institutional Equities argued in a recent note.

The Scoop: The brokerage said that the recent measures, including higher fuel prices, increased import duties on gold and partial work-from-home mandates for government officials, will likely have only a limited impact on consumption and the broader economy. Kotak also argued that the Rs 3 per litre increase in petrol and diesel prices remains inadequate given the large under-recoveries faced by oil marketing companies, which it estimates currently lose around Rs 250 billion every month.

Next Steps: Kotak warned that prolonged disruptions in West Asia could widen India’s current account deficit, push inflation higher, weaken the rupee further and slow GDP growth. The brokerage now expects India’s GDP growth to slow to 6% in FY27 under its base-case scenario, while average inflation could rise to 5%.

Boeing Switch Under India's Lens

Indian air safety officials plan to travel to Seattle in June to observe Boeing's testing of a fuel-control switch panel removed from an Air India 787 in February, after pilots on a London-Bengaluru flight flagged a possible defect, Reuters reported.

Catch Up Quick: The development renews scrutiny of fuel switches on Boeing Dreamliners, which regulate jet fuel flow to engines. Investigators probing last June's Air India 787 crash in Gujarat, which killed 260 people, found the switches had been shut off nearly simultaneously before the aircraft went down.

Setup: The DGCA has directed that the strip-test examination at Boeing's facility be conducted in the presence of an Indian regulatory official, describing the matter as "sensitive in nature."

Air India, which is funding the trip, said the earlier checks confirmed the module as fully functional, but further testing is being pursued as "a measure of abundant caution."

Markets Struggle to Hold Ground Against a Falling Rupee

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