Godrej Consumer, Marico, Tata Consumer Among Goldman’s Top Picks On FY26 Demand Revival

Goldman Sachs expects a gradual revival in India’s consumption growth from the June quarter, aided by a host of macro and policy tailwinds including tax cuts, falling food inflation and potential interest rate cuts. The brokerage has retained a preference for consumer stocks with strong bottom-up drivers that could outperform sector growth in this environment.

Within consumer staples, its preferred stocks are Godrej Consumer Products Ltd. (home insecticide growth from new formulations), Tata Consumer Products Ltd. and Marico Ltd. (scaling up of ‘growth businesses’). In consumer discretionary, it favours Titan Co. and Trent Ltd. (market share-led growth) and Pidilite Industries Ltd. (non-core business expansion).

India’s private final consumption expenditure growth has lagged GDP by about 200 basis points over the past 10 quarters. Goldman attributes this to lingering Covid-related income losses, elevated food inflation in 2024, the government’s focus on capital expenditure over subsidies, and a slowdown in unsecured consumer lending. The weakness was most visible in mass consumption, while affluent consumers continued to spend, aided by rising equity and gold prices.

That said, the narrative is shifting. Goldman expects the income tax cuts announced in the Union Budget, a recent easing in food prices, and an anticipated 100 basis points in rate cuts through calendar year 2025 to boost consumption demand in fiscal 2026.

“These tailwinds are expected to benefit low-income categories like FMCG and apparel via state cash transfers and lower inflation, while middle-income categories like jewellery and travel will likely benefit from tax relief and the upcoming pay commission,” it said.

Goldman sees additional upside in fiscal 2027 from the expected rollout of the 8th Central Pay Commission, which could raise wages for around 50 lakh central government employees. Historically, this has been followed by state-level hikes, which will impact over 1.3 crore workers.

Additionally, Goldman expects a ramp-up in direct benefit transfers in key election-bound states like Tamil Nadu, Uttar Pradesh, and West Bengal.

The brokerage expects March quarter results to reflect current sluggish trends, with signs of a pickup only emerging in the second quarter of fiscal 2026.

It noted that consumers may initially use increased disposable income to repay debt, and that demand normalisation could also be delayed by supply chain adjustments.

Falling input costs are also expected to support margins. Godrej Consumer Products and Britannia Industries Ltd. could benefit from softer palm oil prices, Tata Consumer from lower tea prices, and companies such as Pidilite, Hindustan Unilever Ltd., Asian Paints Ltd., Marico and Emami Ltd. from a correction in crude-linked raw materials.

“While the rising tide may lift all boats, our preference is for companies with clear bottom-up growth drivers,” Goldman Sachs said.