ITC, United Spirits, HUL, Nestle: Defensive stocks back in flavour; here are top picks

Stock market analysts sees limited downside in consumer stocks, as defensives are back in flavour. They believe valuations are turning reasonable and the worst is behind for most consumer companies. Companies with more rural exposure are expected to grow faster in the next two quarters, they suggested. For example, Nuvama expects Dabur India to outpace Colgate-Palmolive in the toothpaste category in the near future. In paints, Berger Paints should outpace Asian Paints, it said.

United Spirits Ltd, United Breweries Ltd, Pidilite and Hindustan Unilever Ltd (HUL) are Nuvama's top picks. Also Britannia Industries Ltd, ITC Ltd and Nestle India Ltd look good from a one-year perspective, the brokerage said.

"In the overall FMCG sector, rural markets continue to outpace urban areas due to increased distribution of freebies and favourable sentiment due to a good monsoon. Rural demand is anyway doing well, whereas urban markets are experiencing pressure and are likely to remain under strain for the next two quarters. In our view, urban demand will start improving from Q2FY26," Nuvama added.

ICICI Securities, in another note, said Britannia Industries, ITC and Godrej Consumer are its top consumer picks. It likes Adani Wilmar, Cello World, Honasa, Jubilant FoodWorks, Jyothy Labs, Kalyan Jewellers from the midcap space.

Emkay Global has selective preference for HUL and Emami, on account of better execution. On some stocks, the brokerage has valuation comfort but improvement in fundamentals would be key ahead, it said.

Nuvama said the urban slowdown may continue amid high rental inflation and sluggish wage growth, but would soon be aided by the impact of tax cuts in the Union Budget, potential interest rate cuts by the RBI and cooling food inflation.

Among FMCG companies, United Spirits, Pidilite and United Breweries posted strong Q3FY25 volume growth along with a positive outlook on demand. On the other hand, Bikaji Foods, Godrej Consumer and Tata Consumer posted a weak set of results, mainly due to steep inflation in raw materials.

Companies with international exposure performed well on the top-line front, but rupee depreciation led to lower rupee sales growth. On the other hand, territories such as Bangladesh performed well for companies such as Marico Ltd and Dabur India Ltd due to low base and some macro stability.

"Andhra reforms is acting as a boon for AlcoBev companies. In Q3FY25, for United Spirits, Andhra contributed 6.1 per cent growth (aided by pipeline filling) with YTD contribution of 2.4 per cent. For UBBL, Andhra contributed 1.5–2 per cent growth in Q3FY25. These players are also ramping up their local production," it said.

ICICI Securities, meanwhile in anotehr note, said Britannia, ITC and Godrej Consumer are its top consumer picks. It likes Adani Wilmar, Cello World, Honasa, Jubilant FoodWorks, Jyothy Labs, Kalyan Jewellers from the midcap space.