India’s fast-moving consumer goods (FMCG) sector is showing early signs of recovery, with rural markets continuing to lead the demand resurgence, according to a recent report by brokerage firm Anand Rathi. While value growth in the quarter ended March 2025 remained steady at 10.7% year-on-year (YoY), up slightly from 10.6% in the previous quarter, volume growth moderated to 5.1% from 7.1%.
Rural India once again outperformed urban markets for the fourth consecutive quarter, with volume growth of 8.4% YoY — nearly four times the 2.6% growth seen in urban markets, according to the brokerage report.
However, unseasonal rains in April and May may weigh on demand for summer-centric products such as soft drinks, ice creams, prickly heat talcs, and skincare items. Some manufacturers could see near-term drag, but the brokerage maintains a positive outlook for the rest of FY26.
“A normal monsoon could further support rural demand recovery, which most FMCG managements are optimistic about,” the report noted.
Input cost pressures have recently started to ease, offering potential relief to FMCG companies’ margins. Anand Rathi expects commodity price moderation, along with selling price hikes taken in H2FY25 and early Q1FY26, to drive profitability of FMCG companies going forward.
“We estimate a 100-basis-point improvement in EBITDA margins between FY25 and FY27, as input cost pressures ease and operational efficiencies kick in,” the report stated.
FMCG Stocks Valuations
Valuations across the FMCG sector have now normalized to their historical averages, the brokerage observed. Going forward, stock returns are expected to be more closely aligned with earnings growth. For the companies under coverage — including some consumer discretionary names — Anand Rathi estimates a ~9% revenue CAGR and ~14% earnings CAGR over FY25–27. This compares with a modest 4% revenue growth and flat earnings performance in FY25.
Stocks to Buy
Anand Rathi’s preferred stock picks in the FMCG space include Hindustan Unilever (HUL), Godrej Consumer Products, Emami, Zydus Wellness, and Mrs. Bectors Food Specialities.
Hindustan Unilever (HUL) | Buy | Target Price: ₹2,840
Godrej Consumer Products | Buy | Target Price: ₹1,430
Emami | Buy | Target Price: ₹840
Zydus Wellness | Buy | Target Price: ₹2,570
Mrs. Bectors Food Specialities | Buy | Target Price: ₹1,875
In the consumer discretionary space, United Breweries stands out as the preferred stock pick, with a target price of ₹2,610.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
