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Informist, Friday, Aug 16, 2024

MUMBAI – Shares of fast-moving consumer goods companies are seen higher next week by analysts. Healthy management commentary on earnings growth, recovery in rural demand, a good monsoon so far, and comfortable valuations have made these stocks appealing to investors, they said.

"The long-anticipated rural consumption recovery shows promising signs for the FMCG sector," Elara Capital said in a research report today. While 2023-24 (Apr-Mar) earnings growth was driven by price increases, volume-led growth is expected to be the norm this year, the brokerage said. "Above-average monsoons align with India Meteorological Department forecasts, potentially boosting rural consumption and benefiting FMCG companies," Elara added.

The sector is expected to see a gradual recovery in key earnings metrics owing to the better monsoon and pickup in rural demand, a research analyst with a large domestic brokerage said. However, a few commodities like coffee and tea are showing inflationary signs, which could be a hurdle for companies operating in those segments, the analyst added.

Going forward, FMCG stocks are likely to extend gains once the festival season starts, Narender Singh, smallcase fund manager and founder of Growth Investing, said. FMCG companies expect 40% growth in sales this festival season, The Hindu BusinessLine newspaper reported Monday. These manufacturers, who witnessed muted growth in the first half of the year owing to the general election, are expecting a recovery with higher growth in the next six months, the newspaper report said.

"The festive season begins with Onam in Kerala, for which we have already announced the specially curated Onam Maharaja offer for our Kerala consumers," the report quoted Kamal Nandi, business head and executive vice-president, Godrej Appliances, as saying. "The offers range from extended warranties and cashback to easy EMI (equated monthly instalments) and lucky gifts worth up to 95,000 rupees and we will see the momentum of offers continuing through the next couple of months till Diwali. We expect 40 per cent higher consumption during the festive season this year in comparison to last year."

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Following are the resistance and support levels for major FMCG stocks for next week as per calculations based on their prices on the National Stock Exchange:

End

Reported by Noel John

Edited by Rajeev Pai

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