Consumption Cycle Set To Bottom Out, Says Jefferies Turning Positive — Check Stock Picks

After a bruising 2025, Jefferies believes India’s consumer and internet landscape is finally poised for better times. The past year was marked by muted demand, margin pressure and disruption from GST 2.0 for staples, mixed performance across discretionary and retail categories, and divergent trends within internet businesses.

Yet, as 2026 begins, the brokerage sees the cycle turning with easing inflation, tax cuts, a favourable low base and margin expansion on the horizon. Its top picks reflect this positioning: Eternal in Internet, Asian Paints, Vishal Mega Mart and Jubilant Food in Discretionary, and Britannia, Godrej Consumer Products and Marico in Staples.

Staples had another difficult year in 2025. Volume growth remained muted despite a low base, margins were squeezed by inflation and volatility in key inputs, and urban demand lagged even as rural outperformed. Unseasonal rains hurt summer categories and the rollout of GST 2.0 triggered short-term disruption across channels, leading to de-stocking and delayed consumer purchases. Jefferies expects 2026 to mark an improvement as channel issues stabilise and companies benefit from easing inflation, tax cuts and the low base across several categories.

The discretionary and retail space showed clear divergence in 2025. High gold prices weakened jewellery demand, impacting buyer growth for Titan, although Jefferies notes the company managed the situation well and expects this to continue. Value retailer Vishal Mega Mart reported strong revenue growth, driven by rapid store additions and resilient demand in tier-2+ cities, even as DMart and Trent saw moderation.

The brokerage expects CY26 momentum to continue for Vishal Mega Mart, with Trent and DMart also gaining from a lower base. Quick-service restaurants faced severe SSSG pressures except Jubilant FoodWorks, which benefitted from self-help measures, though the industry has yet to see a meaningful recovery. Asian Paints staged a strong comeback and Jefferies expects volume momentum to sustain despite elevated competition.

The internet sector remained one of the brightest spots. Quick commerce continued explosive growth, led by Blinkit, both in scale and profitability. Swiggy too saw strong growth though losses remain significant, and the firm flags rising competitive intensity as a key risk.

Food delivery growth moderated to about 17% YoY in late 2025 and is expected to stay around these levels. Nykaa’s beauty GMV is projected to grow at around 25% YoY, in line with recent quarters, while Lenskart is seen as a strong growth opportunity given its leadership position but only around 5% market share and substantial margin expansion potential.

Jefferies’ top picks over a 12-month view reflect selective optimism. Eternal remains a compelling opportunity, with the nearly 20% correction from peak offering an entry point. Asian Paints is expected to sustain volume growth momentum alongside a recovery in industry demand. VMM is positioned as a value retail play, driven by strong same-store sales and store additions.

In staples, Britannia is seen as a key beneficiary of GST cuts with one of the strongest expected volume growth outcomes in coverage. GCPL is expected to benefit from a low base and correction in input prices, while Marico is projected to maintain momentum in its base business and gain share in higher-growth portfolios, with margin gains from softer inputs. Jubilant FoodWorks is expected to see Ebitda growth driven by margin expansion even as SSS moderates on a normalising base. Honasa is viewed as high-risk, high-reward, while Nykaa and Lenskart are seen as compounders.

A key macro swing factor through the year has been GST 2.0. Implemented on 22 September 2025, it reduced tax rates across several categories. Many consumer goods that were taxed at 18% — including toothpaste and brushes, hair oil, shampoo, soaps, biscuits, chocolates and Ayurveda products — moved to 5%, while products earlier at 12% such as condensed milk, instant noodles, cheese, dried fruits, frozen vegetables and namkeens also moved to 5%. Most staples companies saw portfolio-wide tax reductions and passed on benefits through higher grammage in small packs and price cuts in larger ones.

Jefferies argues that the long-term picture is far more constructive. Lower GST rates are expected to increase disposable income and bolster demand across consumer categories at a time when the sector was already navigating moderate demand trends. Over the medium term, this should support higher volumes, partly via higher grammage in small packs, with the visible benefits likely emerging from December 2025 onwards.