Rebound in consumer sector
STORIES, ANALYSES, EXPERT VIEWS
A recent report by UBS indicates the consumer sector is showing signs of a strong rebound, supported by several positive developments. The report suggested that the sector, which has underperformed in recent years, is now positioned for a recovery as multiple factors align in its favour.
Earnings to increase around 13% in FY26: It expects earnings in the consumer sector to grow by around 13 per cent in the financial year 2025-26 (FY26), following a weak performance in FY25, where median earnings growth is estimated to be just 1 per cent.
This projected recovery is largely driven by improving earnings, income support measures, and more attractive stock valuations. "Potential income stimulus - lower taxes and the upcoming Eighth Pay Commission over the next three years - could spur a demand revival in many categories and an extended earnings growth phase".
Additionally, the report added that the sector's valuations have corrected sharply--by as much as 35 per cent since October 2024.
This makes consumer stocks more attractive to investors, especially in a market that may continue to show low risk appetite. At the same time, if risk appetite returns, the sector stands to benefit from that as well.
