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Informist, Friday, Apr. 11, 2024

MUMBAI – Global cues would dictate the direction of shares of fast-moving consumer goods companies in the coming week, analysts have said. This comes amid the macroeconomic uncertainty and fears of a likely recession in the US, as nations assess the potential impact of tariffs and individual deals with the US. Higher food inflation, coupled with reduced lending by financial institutions have negatively impacted urban consumption. The kharif and rabi crop harvests have been stronger this year, which may aid the profitability of these companies, analysts said.

The demand scenario for FMCG companies has not seen any meaningful improvement in the March quarter. Plus, the rise of quick commerce has led to a market share gain at the expense of traditional channels. Also, the flexible direct-to-consumer brands have a competitive edge within the quick commerce space.

HDFC Securities expects urban demand to remain subdued in the near term and foresees recovery only in the medium term. On the earnings front, the gross margin of consumer goods companies is likely to contract to 130 basis points on year, owing to the inferior product mix and inflation predominantly in agricultural commodities, the brokerage said.

The net outflow of foreign institutional investors has hit the FMCG sector alongside the IT sector. In March, FIIs pulled out $643 million of investments in shares of FMCG companies. On the other hand, there was a moderate outflow of $174 million from shares of consumer durables companies, according to data compiled by Bajaj Broking. 

The Nifty FMCG index Friday closed at 55741.10 points, up 0.9%. Resistance for the index is pegged at 56000 points and support is seen at 55200 points, said Nandish Shah, senior derivatives analyst at HDFC Securities.

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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 Simran Rede

Edited by Nishant Maher

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