Nomura has identified reasonable valuations within the consumption space, highlighting strong growth prospects. The brokerage recommends buying HUL, ITC, and Marico following third-quarter business updates from these FMCG majors, which suggest a revival in consumer sentiment. 

🔹 The note from Nomura points out that competitive pressures from direct-to-consumer (D2C) brands might ease, while quick commerce could serve as a catalyst to increase demand for FMCG products. The leading players are expected to implement some price increases in the coming quarters, but these are not anticipated to significantly affect volumes. For FY26, Nomura forecasts a volume growth of 5.5% for leading consumer staples companies, alongside a double-digit EBITDA growth of 12%. 

🔹 Easing inflation and targeted policy support for consumers could further benefit FMCG majors, according to Nomura. The brokerage has set target prices at Rs 3100 for HUL, Rs 575 for ITC, and Rs 760 for Marico per share.

🔹 HUL's shares have underperformed, yielding a negative return of 5% over the last year, with the Nifty FMCG index down nearly 14% from its September 2024 peak. ITC has been in the spotlight after its hotels business demerger but faced an underwhelming 2024, with a negative return of 4%. However, there's optimism about ITC due to the demand buoyancy in hotels and agricultural business recovery. 

🔹 Marico shares rose by over 1.5% on January 10, boasting a strong 28% return over the last year. It's among Nuvama's top picks in the consumption sector, and Citi has a 'Buy' recommendation with a target of Rs 750 per share. CLSA anticipates Marico's consolidated revenue growth in the mid-teens, expecting double-digit growth for the full year.

🔹 Market analysts believe the rural segment might see a gradual recovery, possibly outpacing urban markets in Q3 results. However, the subdued urban demand, even during the festive season, could keep volume growth low. The impact of recent price hikes will be crucial to monitor in upcoming quarters.

🔹 CLSA has turned bullish on FMCG, rating consumer staples as the largest 'Overweight' in its India portfolio. Analyst Vikash Kumar Jain describes this as an anti-consensus call, supported by positive signals from recent state elections, good rainfall, and sowing patterns, suggesting a potential revival in affordable consumption.

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