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Within our consumer coverage universe, almost all segments are likely to see an increase in revenue/EBITDA growth YoY in 2QFY27: Staples at +10%/1%, staples (ex-ITC) at +15%/13%, paints & adhesives at +16%/12%, liquor at +10%/13%, innerwear at +16%/+13%, QSR at +15%/+20%, and jewelry at +23%/+26%

* Staples companies are expected to report resilient revenue growth in 2QFY27, supported by steady volume growth, pricing, and a favorable base (some benefit from purchase deferment by channel partners in September last year amid the GST transition). We expect most staples players to deliver double-digit sales growth, with a healthy mix of price and volumes. Both rural and urban demand are likely to remain broadly steady with no meaningful divergence. With mid-tohigh single-digit price hikes taken across categories, pricing has largely negated GST-2.0 benefits. On the margin front, GM is likely to remain under pressure YoY as companies absorb higher-cost crude and palm oil inventory and agri inflation, partly offset by pricing. However, operating leverage should cushion the impact at EBITDA level to an extent. We expect our coverage universe ex-ITC to deliver sales/EBITDA/APAT growth of 15%/13%/17% in 2Q.

* Paint & Adhesives: Paint industry demand remained steady in 2QFY27, with July seeing healthy trends, August relatively softer, and September showing improvement, aided by a favorable base. Volume growth is expected to remain steady. Festive-driven secondary demand is expected to pick up in October, with the delayed and extended festive season providing support to 3QFY27. RM costs remained volatile, with September witnessing a further escalation after cost pressures had started easing in July-August. Gross margin is expected to contract YoY as most of the low-priced RM was consumed in 1Q. We expect relatively low pressure on EBITDA margin, supported by operating leverage and a favorable base. We model sales/EBITDA/ PAT growth of 16%/ 12%/16% for our coverage universe in 2Q.

* Liquor companies are likely to see continued outperformance in premium spirits, although elevated input costs across glass, PET, and packaging are expected to impact gross margins. This will partly be offset by premiumization and pricing. UNSP is likely to report another weak quarter, with flattish volumes and ~6% revenue growth. P&A volumes should see modest growth, offset by continued sharp declines in the popular segment amid the MML impact and disruption from Karnataka policy changes. Higher brand investments are also likely to drive a slight EBITDA decline. Radico, in contrast, should sustain healthy double-digit revenue and EBITDA growth, led by robust P&A momentum. UBBL is expected to deliver healthy volume-led revenue growth, aided by favorable Karnataka policy changes supporting premiumization, though profitability is likely to remain under pressure from sharp cost inflation. The India-UK FTA, effective from mid-July, remains a structural positive for the sector, with lower import duties expected to provide meaningful margin benefits from 3QFY27. The spirits industry should benefit from supportive state-level policy changes in UP and Karnataka. We expect sales/EBITDA/PAT growth of 10%/13%/13% for our coverage companies in 2QFY27.

* The Innerwear sector continues to witness an improvement in demand in 2QFY27, supported by healthy secondary sales and broad-based traction across channels. PAGE is passing on input-cost inflation through calibrated price hikes, having taken ~2% price increases in mid-May to partly offset RM pressure; the full benefit of these hikes is expected to flow through in 2QFY27. While PAGE’s 1Q performance was impacted by supply chain constraints (while secondary was healthy), it is expected to recoup in 2Q. Competitive intensity is also moderating, with peers reducing deep discounting. We expect PAGE to deliver double-digit revenue growth in 2QFY27. PAGE remains focused on premiumization through new product launches, alongside continued investments in brand building, marketing, and technology. We expect sales/EBITDA/PAT growth of 16%/13%/14% for the company.

* QSR demand trends improved sequentially in 2QFY27, with most brands expected to perform better than in 1QFY27. Companies should benefit modestly from the shift in Navratri to October this year versus September last year. KFC (Devyani and Sapphire) is expected to deliver high-single digit SSSG, while PH SSSG is likely to remain in low-single digits. Jubilant FoodWorks is expected to report 4% SSSG (high base impact), Westlife Foodworld 7%, and RBA 13%, while United Foodbrands is expected to continue outperforming with >20% SSSG. Companies are likely to see a sequential decline in gross margins due to inflation in key RM prices (cheese, chicken, etc.) and low ADS. EBITDA margin (pre-IND AS) is expected to sustain at YoY level, while RBA and United Foodbrands are expected to post margin expansion. We expect sales and EBITDA growth of 15% and 20% for 2QFY27, respectively.

* Jewelry: In 2QFY27, average gold prices increased ~45% YoY (~60% YoY in 1QFY27), while remaining broadly flat QoQ. Despite elevated gold prices, jewelry demand remained resilient during the quarter. Sales growth was partly impacted by the shift in the Navratri festive period to October this year, compared with September last year, as well as the recent reiteration of the government’s stance to defer jewelry purchases. Despite this, demand trends for top players remained strong. Companies are expected to benefit from a onetime inventory gain following the increase in customs duty. We model sales/EBITDA/PAT growth of 23%/26%/27% for our coverage jewelry companies in 1Q.

* Outperformers and underperformers: Among our coverage companies, Titan, Kalyan Jewelers, RBA, Radico, Marico, Nestle, and Page are expected to be outliers in 2QFY27, whereas ITC, JYL, and UNSP are expected to be the underperformers.

* Outlook: Consumption demand remained resilient in 2QFY27, despite multiple macro headwinds. The quarter exited on a healthy note, indicating that positive trends are sustaining, with further optimism around the festive period. While inflation, weak rainfall, and other macro factors remain concerns for consumption, we currently do not model any growth deceleration in 2HFY27. Gross margin is expected to contract in 2Q, and given elevated prices, we believe cost pressures are likely to sustain through 2HFY27 as well. Product mix, pricing strategy, and cost levers should play a key role in arresting the decline in EBITDA margins. Recent de-rating in stocks could provide an opportunity in companies where growth delivery is strong. Our top picks are Titan, Radico, RBA, Zydus Wellness, and Marico.

Input-cost inflation remains elevated, keeping 2QFY27 margins subdued

* The raw material basket remained inflationary in 2QFY27, with several key inputs continuing to trade significantly above last year levels. While crude and select derivatives moderated sequentially, they remained elevated YoY. Consumer companies are likely to face margin pressure in 2QFY27, unlike the previous quarter, where low-cost inventory aided margins to an extent. Pricing should provide only partial offset, keeping margins subdued.

* Non-agri commodities: Crude remained a key inflationary headwind, with Brent averaging USD91/bbl (+34% YoY), while HDPE (+33%), VAM China (+16%), domestic TiO2 (+14%), and soda ash (+17%) remained meaningfully higher YoY. Glass prices are witnessing inflationary trends, while gold prices remained elevated at +46% YoY. Although several crude-linked inputs have corrected sequentially, YoY inflation remains sizeable and is likely to weigh on gross margins in 2QFY27.

* Agricultural commodities: The agri basket also turned more inflationary, with sugar (+20% YoY), mentha (+34%), barley (+14%), cotton (+19%), yarn (+27%), and tea (+13%) seeing sharp YoY increases. Conversely, cocoa (-28%), coffee (-34%), cashew (-14%), and copra (-47%) remained deflationary, providing some relief to select companies. Overall, the benefit from softer commodities remains companyspecific, while broad-based input inflation is likely to keep margins under pressure in 2QFY27.

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