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Dabur India said on Friday its second quarter operating profit would be subdued, partly due to a later than usual festive season and delayed monsoon rains, even as it reaped the benefits of moderating inflation and cost-saving initiatives.

The update follows its peer Marico which also flagged below-normal rainfall distribution weighing on profitability.

Dabur, which sells Vatika Shampoo and Honitus cough syrup brands, said improving macro economic indicators and positive consumer sentiment will help in a "gradual" recovery in its urban and rural markets.

Retail inflation in Asia's third largest economy had eased in August, with the country's central bank, earlier in the day, holding interest rates steady for the fourth straight month.

Cost-saving initiatives and strong international performance helped the firm project a bigger gross margin expansion in the three months from the prior quarter.

The company plans to invest a significant portion of margin gains towards boosting advertising and promotion spends.

The consumer goods firm expects mid-to-high single digit revenue growth in the quarter. The company had posted a near 11% year-on-year increase in the June quarter.