Nomura's top FMCG picks: GCPL, Marico, Tata Cons to gain from rural revival

Business Standard

2 days ago

Nomura on FMCG stocks: Japan-based brokerage Nomura has reiterated 'Buy' ratings on Godrej Consumer Products (GCPL), Marico, and Tata Consumer Products, citing a supportive macro backdrop for rural demand and consumption. With the 2025 monsoon tracking above normal and kharif sowing gaining momentum, the brokerage expects these FMCG names to benefit from a broad-based recovery in volumes.
'A second consecutive year of strong monsoons and bumper foodgrain output is a major tailwind for rural demand. GCPL, Marico, and Tata Consumer are our top picks to play this recovery,' said Mihir P Shah and Riya Patni, research analysts at Nomura, in a note dated August 4.
Why these three stocks?
GCPL (Buy, TP:1,267): Nomura sees volume-led growth picking up in rural and tier-2/3 markets, supported by improving demand for personal care and household products. Its international portfolio also adds strength to the earnings outlook.
Marico (Buy, TP: 711): The brokerage expects Marico to benefit from higher rural incomes and strong positioning in coconut oil and value-added hair oils. Its food portfolio is also scaling up steadily, while cost control efforts support margins.
Tata Consumer (Buy, TP: 1,070): With a diversified product mix and deep rural distribution, Tata Consumer is well-placed. 'It's a key beneficiary of stable rainfall in the East, which supports its packaged tea business, while new launches and staple expansions aid growth visibility,' Nomura said.
Rural demand on the mend
India's rural economy, which had remained subdued over the past few quarters, is showing signs of a turnaround. Many consumer companies have flagged green shoots in rural areas alongside consistent urban demand.
With IMD forecasting above-normal rainfall (106 per cent+ of LPA) for the second half of the 2025 monsoon (August-September), and normal rainfall in August, farm sentiment and sowing activity have picked up.
'Rural recovery appears to be gradually playing out, and with monsoons supporting another bumper harvest, FMCG volume growth could see sustained revival,' Nomura noted.
Kharif sowing picks up pace
Kharif sowing has gained traction, with acreage across paddy, pulses, and maize higher Y-o-Y. While cotton acreage remains lower, the shortfall has narrowed from -9 per cent in June to -2.2 per cent Y-o-Y as of end-July, driven by shifts toward maize due to better economics.
The shift toward maize has led to increased demand for fertilisers, particularly urea, with some reports of temporary supply challenges – especially in Karnataka. However, reservoir levels remain healthy across most regions, offering irrigation support.
Uneven rains, but reservoirs offer cushion
Though Eastern and Northeastern India have seen 22 per cent below-normal rains, reservoir levels remain marginally below normal, cushioning kharif output for now. However, Nomura flagged the need to watch rice and tea production from these regions closely.
Elsewhere, the Northwest and Central regions have received 21 per cent and 23 per cent above-normal rainfall, respectively, to July-end. The South Peninsular region, despite a mild deficit, has reservoir levels 68 per cent above normal, offering strong support for both kharif and upcoming rabi crops.
As of July 25, India's 161 key reservoirs held 60.8 per cent of total live storage capacity, or 53 per cent above the 10-year average.
Inflation tamed, consumption tailwinds ahead
With improved farm output, low food inflation is expected to continue, further supporting consumption. Nomura believes rural-facing FMCG companies are set for a volume-led upcycle as higher farm incomes boost purchasing power.