Tax relief to propel discretionary consumption

The Union Budget 2025-26 has provided big relief to the middle class. Finance Minister Nirmala Sitharaman has lowered the personal income tax lability for the middle-class income earners both under the old as well as new tax regime. Lower tax liability will leave more money in the hands of  consumers, thus increasing spends on consumer discretionary items such as apparel, footwear, quick service restaurants, jewellery companies as well as beauty and personal care segments.

Consumer discretionary companies were under pressure reporting muted SSSG (same store sales growth) over the past few quarters owing to higher inflation which had restricted consumer spending. The tax relief in Budget 2025 is expected to boost the growth of these companies and enhance their growth and earnings outlook.

We expect the Budget to benefit stocks in a) Apparel segment: Trent Limited, Aditya Birla Fashion & Retail, Cantabil; b) Footwear stocks such as Metro Brands, Campus Activewear, Bata India and Relaxo Footwears; c) quick service restaurant companies such as Jubilant Foodworks, Devyani International, Sapphire Foods; d) jewellery companies like Titan Company, Senco Gold, Thangamayil Jewellers, Sky Gold; and e) beauty and personal care companies like FSN e-commerce Ventures (Nykaa).

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