Motilal Oswal Securities is maintaining a positive outlook on India's consumer sector, anticipating a broad-based recovery in fiscal year 2026. The brokerage firm favors Hindustan Unilever (HUL), Godrej Consumer Products (GCPL), and Marico within its consumer universe.

The anticipated recovery is expected to be fueled by several factors, including lower inflation and the possibility of reduced interest rates. Additional support is expected from tax advantages and strong demand during the festive season.

Motilal Oswal Securities believes that urban consumption is showing signs of bottoming out, with recovery becoming more visible in the second half of fiscal year 2026. They anticipate that easing inflation, falling interest rates, and other supportive measures, such as income tax relief, should revive urban consumption in the next 12 months. Some consumer companies have also indicated that they are seeing "green shoots" in urban demand.

The brokerage notes that the consumer sector has experienced a consistent re-rating over the past 10-15 years. Around 2014, the sector was trading at around 30x P/E, but multiples have since increased to over 40-45x since 2019.

However, the earnings delivery for staple companies has been impacted over the last three years by weak demand recovery, competitive pressure, and commodity headwinds. Simultaneously, capital markets keep getting investment opportunities in new consumption stories.

A promising start to the monsoon season, a rebound in rural wages supported by easing inflation, and increased government expenditure are laying the foundation for a broad-based rural revival.

Marico, one of Motilal Oswal's top picks, recently reported a 9% year-on-year rise in Q1 FY26 net profit, reaching Rs 504 crore. This growth was driven by strong international performance and price-led gains in India. The company's revenue also surged 23% to Rs 3,259 crore, despite facing margin pressure from high input costs.