Discretionary Versus Consumption Stocks — Why Brokerages Are Betting Big On One After Budget 2025

The Union Budget 2025 announced landmark tax slab revisions, putting more money in the hands of middle-class consumers. Reports by ICICI Securities and Investec suggest that while discretionary spending is likely to see an immediate boost, consumer staples may not benefit as much.

Investec highlights that the Budget provides a direct boost to urban consumption, with significant income tax savings of up to Rs 1.1 lakh per person. This particularly benefits middle-class consumers and high-income earners, holds the firm.

Since discretionary companies—like Titan in jewellery, United Spirits, Radico Khaitan in alcohol, and Nykaa in the beauty space—are largely urban-driven, these categories stand to gain more than daily staples like groceries and household essentials, as per the brokerage​.

ICICI Securities argues that not all of the Rs 1 trillion in tax savings will go directly into consumption. Instead:

• Consumers may save a portion rather than spend on low-ticket, daily-use staples.

• Aspirational purchases, entertainment, and premium products and services will benefit more.

• Restaurant stock including Jubilant, Sapphire Foods, and Westlife, travel stocks like IHCL, and entertainment stocks with the likes of PVR Inox will outperform essentials.

Moreover, platform plays like Zomato and Nykaa, which cater to urban, high-spending customers, will benefit over fast moving consumer goods brands like Britannia and Dabur​.

As per the brokerages,

1. Luxury and premium segments: The reduction of the highest tax surcharge (from 37% to 25%) is expected to boost big-ticket purchases, from jewellery to premium liquor. Investec maintains 'buy' calls on Titan and United Spirits, expecting them to benefit from this shift​.

2. Platforms: E-commerce platforms like Nykaa and food delivery giants like Zomato and Swiggy are set to gain, as the top 20% of urban consumers—the primary beneficiaries of income tax cuts—are their core audience​.

3. Aspirational durables gain more than essentials: Air conditioners and dishwashers will see higher demand compared to basic appliances like fans and mixers, said ICICI Securities, notes that higher income levels will favour discretionary white goods and premium electronics, benefiting brands like Voltas and Blue Star​.

4. Services > Products: Consumers are more likely to splurge on eating out, travel, and entertainment rather than stocking up on household staples. Investec is bullish on QSR chains like Sapphire Foods, while ICICI prefers PVR Inox and Indian Hotels as key discretionary winners​​.