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Informist, Friday, Dec. 13, 2024

MUMBAI – Having underperformed in recent weeks, shares of fast moving consumer goods are expected to stay weak in the coming week, analysts said. "Until we see some greenshoots in FMCG company commentary, we won't see any meaningful recovery in the near term," said Ajit Mishra, SVP, Research, Religare Broking Ltd.   

Sentiment for FMCG stocks this week were weighed down by the quarterly update for Oct-Dec provided by Godrej Consumer Products Ltd. last week. The company in its mid-quarter update said that the demand conditions in India have remained subdued for the past few months. While the Nifty 50 gained 0.4% in the last week, the Nifty FMCG index fell 1.52%. The Nifty FMCG index has corrected roughly 15% to close at 56,869.40 from its record high of 56,997.45 hit on Sept. 23. 

Inflationary headwinds and excessive monsoon impacted India's consumption in the second quarter of the ongoing financial year, which in turn impacted corporate results. Analysts expect rural consumption to offset the softness in urban consumption in the coming quarters. 

India's retail inflation, while now below the upper end of the Reserve Bank of India's tolerance band, moderated to 5.5% in November from 6.2% in October. Vegetable inflation cooled in November, as it receded to 29% from 42% in the previous month. However, inflation in edible oils has risen to double-digit territory. FMCG companies, including Hindustan Unilever Ltd., Britannia Industries Ltd., Godrej Consumer Products, and Adani Wilmar Ltd. took price hikes in a few categories to offset higher inflation. 

"While assuming a normal monsoon and estimating average inflation of 4.2% in FY2026E, we acknowledge a high probability of sharp volatility in key food items," Kotak Institutional Equities wrote in a report earlier this week. The brokerage attributes a large part of the consumption weakness and urban weakness faced by FMCG companies to the lagged impact of a slowdown in parts of formal jobs, and the lagged impact of a slower pace of government expenditure until the general elections in July. In addition, Kotak Equities also blamed the RBI regulation-led slowdown in personal credit and overall poor-quality job creation in the economy for the issue.

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

End

Reported by Anand JC

Edited by Akul Nishant Akhoury

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