dhcpd gets upstream DNS servers while connecting to your ISP and stores them in /etc/dhcpc/resolv.conf.

Edit /etc/dnsmasq.conf file and point to the /etc/dhcpc/resolv.conf file.

# Change this line if you want dns to get its upstream servers from
# somewhere other that /etc/resolv.conf
resolv-file=/etc/dhcpc/resolv.conf