HUL, ITC to Dabur — Here are 3 key factors driving the FMCG stocks: Should you buy or sell?
The key factors driving FMCG stocks include demand improvement and a good monsoon.
While analysts expect raw material prices to decline and see some calculated price hikes, which is positive for the margins that remained subdued in Q1, the recovery is being watched for.
Over the past three years, consumption has been hit by high inflation, rising interest rates, and a lack of government programs. The recent initiatives, such as the attempts at rationalisation of the Goods and Services Tax, declining interest rates, and cooling inflation, are expected to be favourable, as per analysts.
The Q1 results season too has been encouraging, with the earnings recovery in the coming quarters keenly eyed.
The demand recovery that was seen in the April to June quarter continues. Based on recent interactions with distributors and dealers, analysts feel that demand in the mass urban space improved, though marginally, in July 2025.
As per Antiques Stock Broking, Nestle distributors reported a minor rebound in the milk and nutrition business, with strong growth in beverages, chocolates, and instant noodles. Meanwhile, ITC witnessed a healthy cigarette consumption rate.
Antique analysts believe Hindustan Unilever is experiencing a sequential recovery with broad traction across categories.
Marico's price increase in Parachute had a minor impact on product sales in July but is expected to normalise in the future, as per analysts. They believe Godrej Consumer Products (GCPL) saw a healthy increase in household insecticide use due to mosquito infestation.
Antique Stock Broking prefers Godrej Consumer Products, or GCPL, and Marico in the consumer staples.
The government aims to revive consumption, with many efforts in place.
We believe that Prime Minister Narendra Modi's announcement to rationalise GST rates and simplify the rate structure on August 15th, 2025, will boost consumption, said analysts at Motilal Oswal Financial Services.
Rural markets' performance as per MOFSL has been an outlier for the last 12 months after witnessing a tepid performance during 2022-2023.
Price increases helped drive growth in Q1 FY126 as rural communities remained resilient, said analysts.
Axis Securities pointed out that the urban weakness persists, but recovery is on the horizon. Higher raw material prices have put pressure on gross margins in staple companies, affecting overall performance, said the brokerage.
However, Axis Securities added that in a volatile, uncertain, complex, and ambiguous (VUCA) environment, the FMCG sector stands out for delivering best-in-class return ratios such as ROCE, ROE, and dividend yield, ensuring long-term capital protection. Its top picks include Varun Beverages and DOMS Industries.
We noted a relatively better revenue print and commentary from staple companies in 1QFY26, said Motilal Oswal Financial Services. It continues to like HUL, GCPL, and Marico from the staple universe.
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