FMCG Stocks Outlook
Weak urban demand remains drag for consumer cos
This story was originally published at 18:01 IST on 27 December 2024
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MUMBAI – Weak demand trends in urban areas are set to test the resilience of fast-moving consumer goods companies' shares in the coming weeks, analysts said. Higher raw material prices in Oct-Dec added to the woes for FMCG companies, analysts added.
"Raw material prices are up, and demand continues to be weak. The margins (of FMCG companies) will be under pressure this quarter," said Sachin Bobade, vice-president, research, at Dolat Capital Market Pvt. Ltd. Bobade said that if FMCG companies start reducing the grammage of products to address the demand issue, their volumes could come under pressure. "Oct-Dec won't be good for consumer companies," he said, flagging the gap in urban-rural demand for consumer discretionary companies.
For the Nifty FMCG index, 55,400 points seems to provide strong support while resistance is seen at 57,500-58,000 points in the near term, said Vipin Kumar, senior technical and derivatives analyst at Globe Capital Market. While the Nifty 50 gained close to 1% in this week's trade, the Nifty FMCG index posted a gain of 1.5%. Of the 15 constituent stocks of the Nifty FMCG, four posted losses while 11 saw gains. While Procter & Gamble Ltd. was the biggest loser, down 3.6%, ITC Ltd. gained the most, up 3%.
POLICY VIEW
Meanwhile, the finance ministry Thursday, in its monthly review report, highlighted the softening urban demand in Jul-Sept. The ministry said hiring and compensation practices in the corporate sector played their part in slowing urban consumption growth. The ministry also said that the combination of monetary policy stance and macro-prudential measures by the central bank may have contributed to the demand slowdown. However, urban demand is picking up, it said, as passenger vehicle sales and domestic air passenger traffic registered growth in Oct-Nov.
The Reserve Bank of India's staff, in the central bank's December bulletin, said the prospects for agriculture, and hence rural consumption, are looking up with brisk expansion of rabi sowing. The central bank stated that FMCG companies have flagged fund-raising by their quick commerce counterparts, which are providing deep discounts and indulging in predatory pricing.
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The 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:
| Company | Price | Week-on-week change in % | Resistance | Support |
| Adani Wilmar | 329.20 | 13.20 | 339.00 | 312.30 |
| Britannia Industries | 4769.30 | 1.50 | 4840.60 | 4702.80 |
| Colgate Palmolive India | 2726.45 | (-)0.90 | 2761.50 | 2701.50 |
| Dabur India | 507.15 | 0.90 | 512.60 | 501.30 |
| Emami | 590.25 | (-)0.10 | 600.60 | 577.20 |
| Godrej Consumer Products | 1067.80 | (-)0.20 | 1089.10 | 1049.40 |
| Hindustan Unilever | 2341.25 | 0.30 | 2355.80 | 2321.00 |
| ITC | 478.60 | 3.00 | 484.70 | 472.90 |
| Jyothy Labs | 389.80 | 3.70 | 409.00 | 361.70 |
| Marico | 632.60 | 0.70 | 638.50 | 625.80 |
| Nestle India | 2165.60 | 0.10 | 2179.90 | 2143.80 |
| Procter & Gamble Hygiene and Health Care | 14567.70 | (-)3.60 | 15105.20 | 14141.30 |
| Tata Consumer Products | 907.95 | 2.10 | 918.50 | 893.70 |
| Varun Beverages | 624.30 | 1.90 | 633.00 | 616.30 |
| Nifty FMCG | 56444.25 | 1.50 | 56822.40 | 56031.10 |
| Nifty 50 | 23813.40 | 1.00 | 23989.20 | 23712.70 |
| S&P BSE Sensex | 78699.07 | 0.80 | 79224.90 | 78335.70 |
End
Reported by Anand JC
Edited by Rajeev Pai
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