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Informist, Friday, Dec. 3, 2024

MUMBAI – Even as demand in rural areas continued to outpace that in urban areas, low wage growth and high inflation is expected to be a drag on shares of fast moving consumer goods companies next week. Further, Dabur India Ltd. and Marico Ltd. will be in focus next week as they put out their quarterly update on Friday after market hours.

With fast moving consumer goods companies undertaking price hikes in key categories to offset the surge in input prices, customers likely opted for smaller packs of these products, analyts said. This development likely impacted volumes sold.

Nomura Institutional Equities said that overall consumer demand and volume in the final quarter of 2024 remained weak, impacted by high inflation in key categories like housing and food in urban areas. However, rural demand is expected to show improvement on the back of above-average monsoon and a strong kharif harvest.

It expects margins in soaps, snacks and tea to be under pressure owing to a near-30% on-year inflation in palm oil and tea prices. To offset higher input costs, companies undertook price hikes in these categories. Channel checks suggest consumers of these products are opting for smaller packs, which affects volume growth adversely. In Oct-Dec, analysts expect FMCG companies to report low-to-mid single digit volume growth.

The Reserve Bank of India in its latest Financial Stability Report flagged household balance sheet stress, as the share of consumption loans has increased while the share of asset-creating loans is falling. India's current household debt has risen to around 43% of the gross domestic product, higher than the 35%-of-GDP reading in March 2020. Subprime borrowers are primarily taking on consumption loans while those better off are taking on leverage to buy assets, Nomura wrote in a note drawing observations from RBI's findings.

"India is in the midst of a cyclical slowdown, and this evidence of household balance sheet stress chimes with weak income and K-shaped urban consumption demand," the firm said.

Among companies, Dabur India said its consolidated revenue is likely to rise in low single digit and its operating profit will be flat. In a report after the quarterly update, Nuvama said the numbers were below its expectation and the brokerage now expects the consolidated revenue to rise only 2% as compared to its earlier expectations of 4% rise. Due to this, the brokerage expects the stock to fall in the near term. However, they remain positive on the company in the long term and retained 'buy' rating with a target price of INR 650.

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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 Deepshikha Bhardwaj

With inputs from Anshul Choudhary

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