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

India’s consumer sector is expected to recover strongly, with earnings projected to grow by 13% in FY26, according to a report by UBS. Following a muted performance in FY25, where median earnings growth is estimated at just 1%, this rebound is anticipated to be driven by a combination of income stimulus measures, corrected stock valuations, and favourable base effects. UBS identifies potential policy support, including implementing the Eighth Pay Commission and the possibility of lower taxes, as key catalysts to boost consumer purchasing power and demand across categories. The report also highlights a sharp 35% correction in sector valuations since October 2024, making consumer stocks more attractive amid subdued market risk appetite. UBS views the recent underperformance of the consumer sector—typically seen as a safe and stable bet during both bull and bear phases—as unusual and suggests that this positions the sector for a strong cyclical recovery. With input cost cycles stabilising and earnings base effects turning favourable, the sector is projected to deliver a compound annual growth rate (CAGR) of 12.8% between FY25 and FY27. The rebound is expected to be sustained, supported by policy-driven demand, structural tailwinds, and a more attractive investment setup.