Indian consumer stocks are ready for a rebound: UBS

Mumbai: UBS said Indian consumer stocks are ready for a rebound, citing an earnings recovery, attractive valuations and easing structural challenges.

The brokerage raised its ratings on Hindustan Unilever, ITC, Trent and Colgate to 'buy', while maintaining its 'buy' on Avenue Supermarts (DMart), Godrej Consumer Products and Britannia. UBS' top picks could return between 5% and 22% in the next twelve months

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"We think sector offers defensiveness in a market that may continue to have low-risk tolerance, but could also benefit if risk appetite returns," said brokerage's analysts. UBS downgraded Asian Paints, Dabur and Jubilant Foodworks to 'sell.' "We prefer DMart and Trent as income stimulus plays, given their resilient value retail model. As turnaround stories, we favour HUL and Godrej Consumer Products, five-year laggards with portfolio issues on the mend. We view Colgate and Britannia at an inflection point, with earnings growth revival likely by next year. We see appealing value in ITC after a correction on tax fears," said the brokerage.

UBS said earnings growth could rebound in FY26, led by resilient rural demand, estimates of recovery in urban demand and formation of a fresh demand cycle due to lower taxes.