The Indian consumer sector is under close observation as markets anticipate a resurgence in demand, fueled by recent economic adjustments. Investors are keenly awaiting indications of renewed economic momentum following the Reserve Bank of India's (RBI) rate reductions and income tax cuts.

After a period of sluggish consumption, efforts to invigorate the Indian economy are underway. The RBI has progressively reduced the key rate by a cumulative 100 basis points, signaling confidence in having addressed inflation. Reinforcing this, the recent tax bill exempts an additional 11 million individuals from income taxes, a strategic move designed to amplify consumption within Asia's third-largest economy.

UBS reports that India's consumer sector is showing signs of a strong rebound and expects earnings in the consumer sector to grow by around 13 percent in the financial year 2025-26 (FY26). This recovery is driven by improving earnings, potential income support measures (such as lower taxes and the upcoming Eighth Pay Commission), and more attractive stock valuations. Valuations in the consumer sector have corrected sharply, by as much as 35% since October 2024, making consumer stocks more appealing to investors.

In the Fast-Moving Consumer Goods (FMCG) sector, revenue is expected to rebound by 100-200 bps to 6-8% in fiscal year 2026, driven by volume growth and steady rural demand coupled with gradual urban recovery.

However, challenges remain. Tata Consultancy Services Ltd. has noted caution among American clients regarding tech investments due to ongoing economic uncertainty, casting a shadow over Infosys Ltd.'s update.

Several key companies are in focus:

• HDFC Bank Ltd. and ICICI Bank Ltd.: Both private sector lenders have already surpassed profit estimates.
• Nestle India Ltd.: Expectations are for improved volume growth, driven by a recovery in rural demand. The company is also poised to benefit from reduced palm oil duties and lower coffee prices.
• Infosys Ltd.: Concerns about tariffs may impact revenue growth guidance due to deteriorating demand for new projects.
• Eternal (with Blinkit): First-quarter profit is anticipated to halve due to losses at its quick-commerce business, Blinkit. Investors will be monitoring guidance on profitability as Blinkit expands its "dark stores" network.

Overall, while near-term market volatility is possible, particularly due to global factors such as US trade policy and potential oil price shocks, India's domestic macroeconomic fundamentals appear robust. Improving growth, declining inflation, and proactive measures by the RBI, including rate and CRR cuts, paint a positive picture. The anticipated revival in discretionary consumption, spurred by tax relief and Pay Commission hikes, further strengthens this outlook.