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Positive 4Q print across most categories; inflation concerns may weigh on 1HFY27

* Our widespread consumer coverage universe, a compendium of ~60 consumer companies with a combined revenue of ~INR1.4t in 4QFY26/~INR5.3t in FY26 (INR4.6t in FY25) and a market cap of ~INR31t, delivered aggregate revenue/EBITDA growth of 24%/15% in 4QFY26 and 15%/10% in FY26. Excluding jewelry, aggregate revenue/EBITDA growth stood at 7%/11% in 4QFY26 and 7%/6% in FY26.

* Revenue/EBITDA/APAT performance across all our coverage sub-segments in 4QFY26: staples +6%/+8%/+9%, paint & adhesives +12%/+26%/+32%, innerwear +14%/+11%/+9%, liquor +3%/+17%/+18%, QSR +12%/+13%/NA (loss), and jewelry +78%/+43%/+52% YoY.

* Demand trends improved across most categories during 4QFY26, supported by steady demand recovery, festive demand, and trade pre-buying in select categories. Staples witnessed stable demand conditions, with rural markets continuing to outperform urban. Food-focused companies outperformed personal care peers. Paint demand recovered meaningfully, supported by improving demand, channel stocking ahead of price hikes, and a favorable base. In alcobev, spirits continued to outperform beers. Premiumization remained the key growth driver despite mixed volume trends across players. QSR companies reported continued improvement in demand trends, led by the chicken category, while the pizza category remained relatively subdued. Innerwear demand recovery gained momentum, particularly toward the end of the quarter, aided by festive demand, the onset of the summer season, and easing competitive intensity. Jewelry continued to witness robust growth, driven by strong festive demand, elevated gold prices, healthy same-store sales growth, and increasing traction in old gold exchange programs.

* Input cost pressures resurfaced across categories during the quarter, led by crude-linked raw materials and select agri-commodities, prompting calibrated price hikes by most companies. Nevertheless, staples delivered resilient gross margin and EBITDA margin expansion, supported by operating efficiencies. Paint companies also reported healthy margin expansion, aided by benign raw material costs during the quarter, although management remained cautious due to rising crude prices. In alcobev, margins improved meaningfully on account of favorable input costs and a richer premium product mix. QSR gross margins expanded modestly due to operating leverage and supply chain efficiencies, though EBITDA margins remained under pressure from wage inflation and backend investments. Innerwear margins contracted due to rising raw material costs. In jewelry, elevated gold prices and increasing preference for coins/lightweight jewelry continued to weigh on the studded mix.

* Outliers and underperformers in 4QFY26: Among our coverage companies, TTAN, KALYANKJ, NEST, APNT, PIDI, PAG, and UFBL were the outliers, whereas PNGJL, JYL, BRIT, GCPL, PG, and JUBI underperformed.

* Sector outlook: Input cost inflation remains high due to rising prices of crudelinked materials, packaging, milk, yarn, freight, and glass. To offset these costs, staple companies have taken calibrated price hikes, which have largely negated the benefit of the GST rate cut (7-8%) and could impact demand and margins in the near term. In paints, dealer stocking ahead of price increases is expected to support 1QFY27 sales. However, continued cost inflation may slow the pace of demand recovery and exert pressure on profitability. In liquor, premiumization trends, the UK FTA (albeit delayed), and supportive state-level policies (like Karnataka) are expected to drive healthy growth. Nevertheless, high glass prices remain a concern for margins. In innerwear, demand recovery and company-led initiatives are likely to support volume growth. In jewelry, regulatory changes and elevated gold prices may cause some short-term demand volatility. However, organized players are well placed to manage these challenges, supported by their strong brands, scale, and execution.

* Our top picks are TTAN, RDCK, BRIT, MRCO and ZYWL.

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