India’s FMCG Sector: A Rare Combination of Revenue and Margin Tailwinds
India’s fast-moving consumer goods sector could be headed into one of its strongest earnings phases in years, with a rare combination of revenue and margin tailwinds coming together in 2026, according to Goldman Sachs. The brokerage expects earnings growth to accelerate meaningfully next year as both toplines and margins improve.
On the demand side, GST rate cuts and soft food inflation are set to lift mass-consumption categories including soaps, hair oil, shampoos and biscuits. A weak summer in 2025 has also created a favourable base for beverages and other summer-linked products.
Cost Front: Falling Input Prices
On the cost front, most companies are benefiting from falling input prices across palm oil, crude, tea, copra and extra neutral alcohol, providing powerful gross-margin support. This is expected to boost the profitability of companies in the FMCG sector, making them more attractive to investors.
Godrej Consumer Products, Tata Consumer Products, Varun Beverages and Marico are among the top picks of Goldman Sachs in the staples space. These companies are scaling up high-growth categories while simultaneously benefiting from softening input costs.
Strong Revenue Growth Expected
Varun Beverages is expected to see strong revenue growth as it cycles a weak 2025 summer in India, alongside margin improvement in its Africa operations through backward integration. The company’s strong distribution network and brand portfolio are expected to drive growth in the coming years.
The brokerage also believes that the worst of the earnings cuts for staples is now over. Several FMCG names saw noticeable earnings downgrades for the second half of fiscal 2025 and the first half of the current one as volume growth slowed and margins came under pressure. Ready-to-drink beverages and soaps were among categories hit by the weak summer of 2025.
Three Key Drivers for 2026
Goldman Sachs highlights three key drivers for 2026:
- GST rate cuts from 18% to 5% in soaps, shampoo, biscuits, packaged drinking water and coffee (implemented September 2025), whose benefit will flow through fully from the December 2025 quarter onward.
- Gross margin expansion helped by falling crude, palm oil, tea, coffee, cocoa and copra prices.
- A low base effect after an abnormally wet 2025 monsoon shortened summer consumption for RTD beverages, talcum powder, deodorants, soaps and paints.
The GST cuts are expected to improve affordability, drive premiumisation, boost price-point packs and shift market share from unbranded to branded players as price gaps narrow.
Consumer Discretionary: A Cautious Approach
Goldman Sachs remains cautious on parts of consumer discretionary, citing elevated valuations and intensifying competition in grocery retailing, paints and fashion. Its top pick here is Titan, which it says has high visibility of over 20% earnings growth, and currently trades toward the lower end of its sector valuation range.
Overall, the FMCG sector is expected to see a strong earnings phase in 2026, driven by a combination of revenue and margin tailwinds. Investors can consider investing in companies like Godrej Consumer Products, Tata Consumer Products, Varun Beverages and Marico to benefit from this trend.