Consumer sector stocks witnessed a broad correction over the past month, but brokerage Investec remains selectively positive on companies with strong brands, pricing power and premiumisation-led growth opportunities.
In its latest consumer sector note dated June 8, Investec highlighted that FMCG companies continued to take price hikes across several categories, including snacks, breads, edible oils, soaps and oral care products. The brokerage noted that companies are using selective pricing actions to offset persistent cost pressures from key raw materials.
Investec pointed out that inflationary pressures remain visible in commodities such as edible oils, tea, crude-linked inputs, polymers and gold, while trends in other raw materials have been relatively mixed.
The brokerage also observed a shift in strategy among quick-service restaurant (QSR) operators. Companies have increasingly focused on value resets, combo recalibration and menu rationalisation to maintain customer traffic amid a price-sensitive consumption environment.
Despite the recent correction across consumer stocks, Investec believes select companies remain well-positioned to navigate the current environment.
Among large-cap names, the brokerage's preferred picks are Eternal, Marico, Varun Beverages and Titan Company.
In the mid-cap segment, Investec continues to favour United Spirits and Radico Khaitan, citing ongoing premiumisation trends in the alcoholic beverages market.
For the small-cap space, the brokerage's preferred names are Mrs Bector Food Specialities and International Gemmological Institute.
According to Investec, companies with strong distribution networks, resilient demand, pricing flexibility and exposure to premium consumption trends are likely to outperform as the sector navigates inflationary pressures and evolving consumer spending patterns.
Disclaimer: The information provided is for informational purposes only and should not be considered financial or investment advice. Stock market investments are subject to market risks. Always conduct your own research or consult a financial advisor before making investment decisions.