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Informist, Friday, Mar. 28, 2025

MUMBAI - Shares of fast-moving consumer goods companies are likely to see limited gains next week as the weakness in consumption trends is expected to continue, analysts tracking the sector said. The subdued demand is likely to weigh on the volume growth of FMCG companies for the March quarter, they said. Growth in rural areas is stable and has not been accelerating, though it is expected to outpace urban demand for the fifth consecutive quarter.

Rising input costs have pushed these companies to hike prices of their products. Rise input costs across segments is seen continuing in the near-term and is likely to drag down the margins of companies in this sector, analysts said. These companies are expected to report an on-year decline in their operating margins for the March quarter, but may see a flat-to-slight recovery on a sequential basis, analysts said. This increase in prices of tea and coffee has not been in-line with overall inflation, a research analyst at a domestic brokerage said. Consumer sentiment has been shifting to smaller and cheaper alternatives from luxury and large-sized goods, InCred Equities said in a report.

Kotak Institutional Equities has trimmed its estimates for earnings per share of FMCG companies for 2024-25 (Apr-Mar) by 4% and that for FY26 by 1-3%. This is because of rising prices of select commodities such as palm oil, tea, and coffee. The broking firm's preferred pick in the FMCG pack is Godrej Consumer Products following the stock's 26% correction in the last six months. "Notwithstanding the near-term margin weakness, we believe that GCPL will be able to recoup its soap segment's profitability through gradual price hikes, and potential easing of palm oil prices once the new crop arrives by 2QFY26E (Jul-Sept)," the brokerage house said.

The stock closed 1.3% higher at INR 1,159.25 on the National Stock Exchange Friday. Most FMCG stocks closed in the green Friday, with Procter & Gamble Hygiene & Health Care and Tata Consumer Products being the top two gainers in the Nifty FMCG index. During Oct-Dec, FMCG was among the sectors that saw massive foreign investor outflows worth $3.3 billion.

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Following are the resistance and support levels for the sector's key stocks for next week, as per calculations based on their prices on the National Stock Exchange:

End

US$1 = INR 85.47

Reported by Simran Rede and Anjana Therese Antony
Edited by Ashish Shirke

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