India's consumer sector ready to rebound, earnings to grow by 13 pc in FY26: UBS Report

ANI April 22, 2025 234 views

India's consumer sector is poised for a strong recovery after years of underperformance, according to a new UBS report. The analysis projects 13% earnings growth in FY26, fueled by potential income stimulus measures and more attractive stock valuations. Key drivers include possible tax reductions and the Eighth Pay Commission implementation, which could significantly boost consumer purchasing power. With sector valuations having corrected sharply since late 2024, UBS sees this as an opportune moment for investor consideration.

"The consumer sector looks ready to rebound, with several factors aligning favourably, Earnings look set to recover in FY26" – UBS Report
New Delhi, April 22: India's consumer sector is showing signs of a strong rebound, supported by several positive developments, according to a recent report by UBS.

Key Points

1

UBS forecasts 13% earnings growth for India's consumer sector in FY26

2

Income stimulus like tax cuts and Eighth Pay Commission to boost demand

3

Sector valuations corrected by 35% since October 2024

4

FY25 earnings growth estimated at just 1% before rebound

The report suggested that the sector, which has underperformed in recent years, is now positioned for a recovery as multiple factors align in its favour.

It said, "The consumer sector looks ready to rebound, with several factors aligning favourably, Earnings look set to recover in FY26".

It expects earnings in the consumer sector to grow by around 13 per cent in the financial year 2025-26 (FY26), following a weak performance in FY25, where median earnings growth is estimated to be just 1 per cent.

This projected recovery is largely driven by improving earnings, income support measures, and more attractive stock valuations.

One of the key growth drivers identified in the report is the potential income stimulus over the next few years. This includes the possibility of lower taxes and the implementation of the Eighth Pay Commission, which is expected to boost the purchasing power of consumers. These measures could lead to a revival in demand across many consumer categories and support a longer phase of earnings growth.

The report said, "Potential income stimulus - lower taxes and the upcoming Eighth Pay Commission over the next three years - could spur a demand revival in many categories and an extended earnings growth phase".

Additionally, the report added that the sector's valuations have corrected sharply--by as much as 35 per cent since October 2024.

This makes consumer stocks more attractive to investors, especially in a market that may continue to show low risk appetite. At the same time, if risk appetite returns, the sector stands to benefit from that as well.

The report also highlighted how unusual the consumer sector's recent underperformance has been. Typically, this sector performs well during bull markets, as well as during bear markets when investors look for safer, defensive options.

However, since the market peak in October 2024, the sector has continued to lag, even as broader markets have sought defensive plays. UBS believes this rare trend now creates a favourable setup for the sector's performance going forward.

The main reason for the sector's weak performance has been its inconsistent earnings growth. But the report noted that the input cost cycle and base effects are expected to turn positive in FY26, providing further support for earnings recovery.

The report expects a 13 per cent growth in earnings for FY26 and projects an average annual growth rate (CAGR) of 12.8 per cent between FY25 and FY27.

Reader Comments

R
Rahul K.
This is great news for our economy! With consumer demand picking up, it should create more jobs and opportunities. The 13% growth projection seems optimistic but achievable if all these factors align. 👍
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Priya M.
I hope this rebound translates to better products and services for consumers too. Sometimes companies focus so much on earnings they forget about quality. Fingers crossed this growth benefits both businesses AND customers!
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Amit S.
Interesting analysis but I'm skeptical about the Pay Commission impact. Government employees are just one segment - what about the millions in private sector and informal economy? The report seems to overlook this.
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Sunita P.
As a small business owner, this gives me hope! The last few years have been tough but if consumer confidence returns, maybe we can finally expand our operations. 🤞
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Vikram J.
The valuation correction makes this sector attractive for long-term investors. Might be a good time to rebalance my portfolio with some consumer stocks. Thanks for sharing this insight!
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Neha R.
While the projections look good, I wish the report discussed sustainability aspects too. Consumer sector growth shouldn't come at environmental cost. Hope companies keep this in mind during the rebound.

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India consumer sector UBS report earnings growth FY26 forecast Eighth Pay Commission stock market