Indian consumer firms to see Q3 margin spur as input costs soften: Nomura

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Indian consumer companies are set for sequential margin improvement in the December quarter (Q3FY26), supported by softening raw material prices and robust execution by sector leaders, Nomura analysts said in its latest India Consumer & Commodity Tracker note dated November 28, 2025. 

 

The brokerage has revised its top picks to Godrej Consumer Products (GCPL), Tata Consumer Products (Tata Consumer), Marico, and Britannia in staples, and Titan and Asian Paints in discretionary on the back of stronger growth trajectories, healthier balance between pricing and volumes, investments in brand-building and distribution, and higher premiumisation levels.

 

Nomura said it prefers companies showcasing superior execution, innovation-led product strategies, digital investments, and pricing power, especially as stabilising input costs offer room to defend or expand gross margins (GPMs). With commodity prices expected to remain rangebound in the near term, the brokerage does not foresee further price cuts or hikes and expects most firms to deploy cost savings toward gross margin expansion.

Raw materials ease further; broad-based positives across the consumer basket

 

Nearly all key raw materials continued to soften on a month-on-month (M-o-M) basis in November, and remain rangebound or deflationary compared with the previous quarter. This is expected to support meaningfully stronger GPMs in Q3FY26, Nomura said.

 

Among the most impactful trends, palm oil prices moderated steadily, which will benefit soap and packaged foods makers. GCPL and Hindustan Unilever (HUL) should see meaningful margin improvement on account of lower palm oil inventory costs accumulated in prior months. Britannia, ITC’s foods business, and Nestlé India are also likely to gain from the decline.

 

Tea and copra prices largely held steady through November, remaining down on a year-on-year (Y-o-Y) basis, but showed limited correction after the new season crop. This stabilisation reduces the likelihood of further price cuts, helping Tata Consumer and Marico sustain sequential margin gains. Liquid milk prices fell sharply for the first time in a year, down 7 per cent month-on-month (M-o-M), which Nomura sees as a key positive for Britannia and Nestlé. Stable gold prices during the month also bode well for footfalls and festive-season sales at Titan amid the upcoming wedding season.

 

Other important trends included a sharp correction in amla prices, which could ease cost pressure for Dabur, and continued softness in wheat, maize, sugar, and crude-linked packaging materials such as HDPE, all of which support margins for packaged foods, personal care, and home care players. Soda ash prices, still down 5 per cent Y-o-Y, should aid HUL’s detergent portfolio.  ALSO READ | Choice initiates Smartworks with 'Buy'; cites favourable leasing economics

Company-wise impact: Clear beneficiaries emerge

 

Nomura sees GCPL, Tata Consumer, Marico, and Britannia as the key near-term winners of the commodity downcycle.

 

For GCPL, lower palm oil prices are expected to kick in meaningfully from Q3, providing a strong uplift to gross margins. Marico stands to benefit from copra remaining rangebound, which limits downside risk from price cuts and allows earlier price hikes (around 60 per cent Y-o-Y) to drive revenue growth and margin gains.

 

Tata Consumer should see the full benefit of cheaper tea inventory flow into Q3, although 

any sharp future correction may trigger additional price reductions. Britannia and Nestlé are positioned for strong sequential margin expansion due to softer wheat, milk, sugar, and edible oil prices.

 

Titan is expected to benefit from stable gold prices in November despite high Y-o-Y inflation, with the wedding season likely to drive jewellery demand.

 

In the neutral-to-positive bucket, HUL may see marginal GPM improvement driven by moderating crude-linked inputs and stable palm oil and coffee prices. However, the company is expected to reinvest most gains into advertising and promotions, keeping operating profit margins within its guided 22-23 per cent range.

 

Colgate-Palmolive India may see some cost relief from softer maize and crude-based inputs, but the GST inverse duty structure will partly offset the benefit. For paint companies, declining Brent prices support margin outlooks, though rising competition is likely to keep operating profit margins stable despite a possible year-on-year gross margin expansion.  ALSO READ | DMart to Swiggy: CLSA picks top stocks to ride India's consumption story

Risks tilt narrow; raw material outlook constructive

 

The only notable inflationary pressure came from liquid paraffin (LLP), which rose 6 per cent M-o-M and could impact hair oil and personal care players such as Dabur, Marico, HUL, and GCPL if the uptrend sustains.

 

Nomura said above-normal monsoons have resulted in well-filled reservoirs, which bode well for the rabi crop cycle and should keep agricultural-linked inputs stable in the near term.

 

Therefore, the brokerage expects a strong quarter for the consumer sector, led by easing commodity pressures, normalising rural sentiment, and healthy festive demand. Within this backdrop, companies with superior execution, brand strength, and pricing power are expected to outperform peers in both growth and margins.  Disclaimer: Target price and stock/sector outlook has been suggested by Nomura. Views expressed are their own.