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Informist, Friday, May 9, 2024

MUMBAI – Shares of fast-moving consumer goods companies are seen trading sideways with a positive bias next week as investors look to move to defensive sectors in a volatile market, analysts said. FMCG shares are traditionally considered defensive in nature owing to their link to consumption which tends to be volatility-agnostic. The Nifty FMCG index is likely to find strong support at 54300–54700 points and face strong resistance at 56600–57000 points, according to technical analysts. It is likely to move sideways until it breaches either level, they said.

With an above-normal southwest monsoon predicted in the September quarter, experts and traders see an overall increase in food grain output in 2025-26 (Jul-Jun), helping curb pulses imports, thereby keeping a lid on food inflation. A forecast of above-normal monsoon rainfall at 105% of the long-period average is expected to drive agricultural growth to 4% in 2025-26 (Apr-Mar), according to India Ratings and Research. The rating agency believes that a good monsoon spread, coupled with increased irrigation and higher food grain production in the rabi season, will support consumption growth and help the Indian economy withstand external challenges.

Companies have retained their view of rural markets performing better than the urban counterparts, a view also backed by the latest NielsenIQ report. Growth in rural demand for FMCG products, which grew four times faster than urban demand in Jan-Mar, moderated sequentially to 8.4% in the March quarter from 9.2% in the December quarter but was higher than the 7.2% growth a year ago, the report said. Overall, FMCG volume growth in the March quarter was 5.1% and price-led growth was 5.9%, NielsenIQ said. It also said that the domestic FMCG market grew 11% on year between January and March, driven by small packs and rural consumption.

On Friday, the Nifty FMCG closed at 55633 points, down 0.7%. Intraday, it hit a one-month low of 55038.50 points. The index extended losses for the fourth consecutive session Friday and fell 1.1% this week, broadly similar to the 1.4% fall in the benchmark Nifty 50 index. Yet, despite being defensive in theory, these shares could not outperform the frontline index over a 90-day period, as the FMCG index has grown only 0.9% than Nifty 50's growth of 1.9%.

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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 Ashish Shirke

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