Stars Finally Aligning For India’s FMCG Story, Says Goldman Sachs — Check Stock Picks
Goldman Sachs also believes that the worst of the earnings cuts for FMCG staples is now over.
India’s fast-moving consumer goods sector could be headed into one of its strongest earnings phases in years, with a rare combination of revenue and margin tailwinds coming together in 2026, according to Goldman Sachs.
The brokerage expects earnings growth to accelerate meaningfully next year as both toplines and margins improve. On the demand side, GST rate cuts and soft food inflation are set to lift mass-consumption categories including soaps, hair oil, shampoos and biscuits. A weak summer in 2025 has also created a favourable base for beverages and other summer-linked products.
On the cost front, most companies are benefiting from falling input prices across palm oil, crude, tea, copra and extra neutral alcohol, providing powerful gross-margin support.
Top FMCG Stock Ideas
Goldman Sachs’ preferred picks in staples are companies that enjoy not just macro tailwinds but stock-specific catalysts as well. Its top ideas include Godrej Consumer Products, Tata Consumer Products, Varun Beverages and Marico.
According to the brokerage, these companies are scaling up high-growth categories while simultaneously benefiting from softening input costs. VBL, in particular, is expected to see strong revenue growth as it cycles a weak 2025 summer in India, alongside margin improvement in its Africa operations through backward integration.
The brokerage also believes that the worst of the earnings cuts for staples is now over. Several FMCG names saw noticeable earnings downgrades for the second half of fiscal 2025 and the first half of the current one as volume growth slowed and margins came under pressure. Ready-to-drink beverages and soaps were among categories hit by the weak summer of 2025.
With these headwinds now subsiding, Goldman Sachs argues that the downgrade cycle is largely complete and strong EPS growth lies ahead for many companies.
Staples: Multiple Levers Firing At Once
Goldman Sachs highlights three key drivers for 2026:
GST rate cuts from 18% to 5% in soaps, shampoo, biscuits, packaged drinking water and coffee (implemented September 2025), whose benefit will flow through fully from the December 2025 quarter onward.
Gross margin expansion helped by falling crude, palm oil, tea, coffee, cocoa and copra prices.
A low base effect after an abnormally wet 2025 monsoon shortened summer consumption for RTD beverages, talcum powder, deodorants, soaps and paints.
The GST cuts, the brokerage notes, should improve affordability, drive premiumisation, boost price-point packs and shift market share from unbranded to branded players as price gaps narrow.
Goldman Sachs remains cautious on parts of consumer discretionary, citing elevated valuations and intensifying competition in grocery retailing, paints and fashion. Its top pick here is Titan, which it says has high visibility of over 20% earnings growth, and currently trades toward the lower end of its sector valuation range.
