India’s Consumer Engine Is Sputtering Back To Life

India’s shoppers have been unusually quiet. For the past 18 months, high food inflation, weak rural wages, and an identity crisis in the FMCG aisle left consumption sputtering. Value retail slowed, and bellwether names such as Hindustan Unilever and Dabur began to look less like growth dynamos and more like expensive nostalgia.

But in 2025-26, the sector’s pulse is picking up. UBS Securities expects a 13% rebound in earnings in the fiscal year, led by falling input costs and potential income stimuli like the Eighth Pay Commission. There is also expectation that the cuts in personal income tax rate will aid consumer demand. 

ICICI Securities, meanwhile, sees structural strength in value retail’s twin engines, Avenue Supermarts’ DMart and Vishal Mega Mart, and notes the accelerating footprint of  disruptors such as Blinkit and Zepto. Pepper it with commodity deflation and a possible rural kicker from the monsoon, and you might just have the settings for a recovery in shopping.

At the heart of the Indian consumer story is a three-way tussle between methodical player DMart, nimble upstart Vishal Mega Mart, and notification-happy quick commerce. Each one chases the same wallet share in a country where value is still gospel and loyalty is one click away from defection.

DMart continues to scale its execution-first playbook, operating 415 stores across 17.2 million square feet, with a capital outlay of ₹300–350 million per store, according to ICICI Securities. No flash, no frills, no app gamification, just the treadmill of controlled procurement and operational excellence.

Vishal Mega Mart is racing ahead on a lighter chassis. Its asset-light model spans 668 stores across 432 cities, enabling faster payback and deeper penetration in Tier-2/3 towns. Private labels contribute around 73% of its sales, especially in apparel and general merchandise, which helped it clock gross margins of 28.6% in July-March. In the same period, its same-store sales growth outpaced DMart’s, led by value-conscious consumers trading down in everything but frequency.

Then there’s quick commerce. They are the latest disruptors and possibly the most misunderstood. Platforms such as Blinkit, Instamart, and Zepto now manage fleets of over 400,000 riders collectively, with 3–5 monthly orders per user. They are not just delivery apps but behaviour platforms, reshaping retail around speed, convenience, and frequency.

As ICICI Securities points out, their real edge lies in gamified discovery, real-time stocking, and bundling tricks that seduce the millennial basket. The fight for footfall has become a fight for frequency.

One wildcard neither brokerage has fully priced in is the Southwest monsoon. A good monsoon lifts farm income, rural sentiment, and FMCG volumes. Last year’s El Nino scare depressed sentiment. This year, with IMD predicting a normal monsoon rainfall, it could well be the invisible tailwind behind a rural demand bounce.

Laggards, Loyalty, and the Long Game
Brokerage UBS Securities divides the sector into four buckets. Growth turnarounds such as Hindustan Unilever and Godrej Consumer, disruption narratives including DMart and Trent, temporary laggards such as Britannia, ITC, and Colgate; and contrarian cycle plays like Jubilant Foodworks.

Take HUL. It’s been a five-year laggard, bogged down by portfolio gaps and valuation excess. But UBS projects a 6–7% volume rebound in the second half of 2025-26, hinging on easing input costs and strategic tweaks under its India-focused global CEO. If that plays out, the stock might finally earn back its premium.

Colgate, after resetting EBITDA margins to 30–31% to push premium products, is now gaining share. UBS expects earnings to rebound from July, positioning it again as a dependable compounder.

Even ITC—long seen as a dividend ATM with ESG baggage—looks underappreciated. UBS highlights its valuation discount relative to historical norms and flags it as a potential beneficiary of the Eighth Pay Commission’s income boost.

Meanwhile, the so-called “disrupted” stocks may not be so disrupted after all. DMart, despite quick commerce fears, is expected to deliver a 25% EPS CAGR through 2027, according to UBS. Conglomerate-owned Tata Group’s Trent plans to add 400 new Zudio stores by 2027, riding a 36% EPS CAGR as it expands into Tier-2 towns.

Investors should watch for narrative overreach too. Jubilant’s like-for-like growth is improving, but UBS argues the upside may already be priced in, especially given its 30% valuation premium to its five-year average. Asian Paints faces intensifying competition from Grasim. Dabur continues to wrestle with portfolio inertia and lacks a clear fix.

Follow Footprint, Not Hype
The big picture is that India’s consumption story is intact, but the map is changing. Retail expansion is shifting from capex-heavy metros to Tier-2 towns. The consumer is becoming platform-agnostic and loyalty-light. Value matters, but so does velocity. And, digital engagement is not a value-add.

Economists would do well to update their demand models. The urban middle class doesn’t behave the way it did pre-pandemic. Monsoons matter, but so do cashback offers and app nudges.

Investors, meanwhile, need to get granular. This isn’t a rising tide that lifts all boats. It’s a segmented recovery, with digital players surfing ahead, traditional retail paddling hard, and FMCG giants trying to unlearn and relearn.

The consumer is back. But they’ve got more choices, shorter attention spans, and one thumb on the “uninstall” button. For consumer companies and investors, it is no longer about building moats. It is about staying on the app list.