- Consumer stocks face pressure due to uneven monsoon and El Niño risks affecting rural demand
- Britannia and Dabur are vulnerable due to high rural market dependence if monsoon worsens
- Macquarie prefers Titan, Lenskart, Marico, and Hindustan Unilever for stronger growth prospects
Consumer stocks are back in focus after Macquarie warned that an uneven monsoon and the possibility of El Niño could weigh on rural demand, even as it sees limited risk to food inflation. The brokerage said the biggest variable to watch is not just the overall rainfall this season but how the monsoon performs in the coming months and how rainfall is distributed across regions.
As a result, Macquarie flagged Britannia and Dabur as consumer companies that could face greater pressure due to their relatively high dependence on rural markets if monsoon conditions deteriorate further.
Instead, the brokerage prefers companies with stronger structural growth drivers and relatively better positioning. Its top picks in the consumer space are Titan, Lenskart, Marico and Hindustan Unilever (HUL).
ALSO READ: Why BofA Is Betting On India's Affluent Consumer Despite Inflation Concerns
According to Macquarie, history suggests that weak rainfall during the latter half of the monsoon season can have a much sharper impact on agricultural production and rural incomes than a weak start alone. The brokerage pointed to 2019 as an example, when June rainfall was just 67% of the Long Period Average (LPA) before recovering sharply to 105% in July, 115% in August and 152% in September, limiting the impact on farm output and rural demand.
The brokerage believes the government's proactive measures—including contingency plans for drought-prone districts, reservoir management and foodgrain stockpiles—should help contain food inflation even if rainfall remains uneven. However, it remains cautious on consumer demand in rural India.
Macquarie also noted that while concerns around food inflation have resurfaced, the government enters the season with comfortable wheat and rice inventories, reducing the likelihood of a sharp spike in food prices.
While the monsoon has made a weak start, the brokerage says the eventual outcome for rural consumption will depend largely on rainfall during July to September, historically the most important period for agricultural activity.
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