Morgan Stanley has outlined tactical investment ideas across India's consumer sector, identifying stocks positioned to outperform and underperform the broader market over the next 15 to 45 days as earnings momentum, valuation resets, and input-cost trends unfold.

Recovery Bets: Fashion and Lifestyle Stocks

The brokerage sees significant scope for a rebound in Trent Ltd, which has underperformed the market in recent months. The stock declined approximately 8.00% over the past three months compared to a 6.00% rise in the Sensex.

After the recent correction, valuations at around 72x forward earnings are now closer to discretionary retail peers, leading Morgan Stanley to anticipate near-term upside potential.

Page Industries Ltd presents a similar recovery thesis, having fallen 17.00% over three months. The brokerage expects December-quarter revenue growth to improve sequentially to 6.00% with accelerating volumes. The stock's valuation, currently well below its five-year average, could re-rate as earnings momentum returns.

Aditya Birla Lifestyle Brands Ltd also features among preferred picks, with Morgan Stanley expecting sequential performance improvement and approximately 10.00% revenue growth, supported by better trends across lifestyle and allied brands.

Staples and Beverages: Selective Optimism

In the staples segment, Morgan Stanley remains positive on Marico, citing strong revenue growth driven by pricing strategies and easing copra costs, which should support margin recovery. Despite already outperforming peers, the firm believes further gains are possible as results stay ahead of the sector.

Varun Beverages represents another preferred investment, with expectations of upbeat management commentary around growth prospects and optionality from portfolio expansion keeping the risk-reward equation favorable.

Titan Company remains a relative outperformer despite sharply higher gold prices. Morgan Stanley expects strong festive-led jewellery growth in the December quarter, with stable-to-improving margins supporting continued stock strength.

Jubilant FoodWorks is positioned as a near-term earnings play, with solid same-store sales growth likely to reverse recent stock underperformance.

Caution Flags: FMCG and Retail Concerns

Morgan Stanley turns notably cautious on several heavyweight consumer names where near-term triggers appear limited. Britannia Industries is expected to underperform the broader market despite steady revenue growth. While biscuits are widely viewed as beneficiaries of GST rate cuts, the firm believes the stock will remain range-bound due to a lack of immediate catalysts.

Caution extends to FMCG majors Dabur and Hindustan Unilever. For Dabur, Morgan Stanley points to a slow pace of demand recovery and relatively weak performance versus peers, even as margins inch upward. Hindustan Unilever is expected to post the lowest revenue growth among FMCG peers in the December quarter.

In the paints segment, Berger Paints is flagged as vulnerable to continued underperformance. Morgan Stanley expects December-quarter revenue growth to trail management guidance and lag peers, particularly Asian Paints, based on dealer checks and weaker volume trends.

The brokerage expresses most concern about Avenue Supermarts, where near-term growth has softened meaningfully. Despite management's long-term focus on aggressive store expansion, current revenue growth trends and extremely rich valuations leave little room for disappointment.

Morgan Stanley has identified India as positioned for a significant market recovery, despite the country experiencing its worst relative performance versus emerging markets since 1994. The investment bank's analysis suggests that current market discomfort may present profitable opportunities for early-moving investors.

Macro Policy Shift Creates Growth Momentum

The most significant development is India's transition from a restrictive to reflative policy stance. Both the Reserve Bank of India and the government have begun coordinating efforts to revive growth momentum through multiple channels.

This coordinated approach differs from India's previous growth phases, which typically relied on either fiscal or monetary support alone. The combination is expected to improve credit transmission and lower the cost of capital significantly.

Earnings Recovery and Foreign Investment Positioning

Despite consensus caution on earnings, leading indicators suggest positive estimate revisions in coming months. Foreign portfolio investor exposure remains near cycle lows, historically limiting downside while amplifying upside potential when growth surprises emerge.

The current positioning creates favorable conditions for sentiment shifts, with the bar for positive surprises relatively low given light institutional exposure.

Policy Reforms and International Relations

The February 2026 Union Budget presents multiple reform opportunities that could enhance India's capital attractiveness:

• Correcting inverted duty structures
• New production-linked incentive schemes
• Capital market reforms including buyback taxation fixes
• Broadening FPI definitions for more investor classes
• Making GIFT City fully tax-free

Additionally, external factors are becoming more favorable. A potential India-US trade deal could reduce US tariffs on Indian goods, while improving China relations and Beijing's "anti-involution" push are easing external headwinds.

AI Investment Opportunities and Market Risks

The February 2026 India AI Impact Summit could establish a credible AI investment narrative around Indian talent, services, and infrastructure - areas where global investors are actively seeking opportunities beyond US markets.

However, supply-side risks remain. Strong primary issuances in 2025 are likely to continue, and any concentration of IPOs or block deals could create short-term share price volatility despite broader positive trends.

Sector Positioning for Recovery

Morgan Stanley identifies specific sectors positioned to benefit from improving conditions:

These sectors represent the most direct beneficiaries of the coordinated policy support and improving macro environment that Morgan Stanley expects to drive India's market recovery.