FMCG index jumps nearly 2% as heavyweights like Dabur, HUL, and Britannia shine

The fast-moving consumer goods (FMCG) index jumped nearly 2 per cent on the NSE and BSE on Tuesday, November 29. The sector was supported by heavyweights such as Dabur India, Hindustan Unilever (HUL), Britannia Industries, Godrej Consumers, Emami, and among others. 

The surge in the overall FMCG counters can be attributed to the better volume growth expected by the Street during the October-December quarter of the financial year 2022-23.  

At the close, the Nifty FMCG index was up 1.87 per cent to 45,078.55 compared to a 0.30 per cent rise in Nifty50. 

Also Read: FMCG makers expect margins improvement and comeback of rural sales during October-December as inflation softens

FMCG majors like Dabur India gained most of all by 6 per cent, followed by Emami up over 5 per cent, while HUL was up over 3.5 per cent, Marico was up 2.5 per cent, and Britannia was up over 1.5 per cent. 

Similarly, shares of broader market companies also joined the gaining party as BCL Industries, ADF Foods, surged most by 17 and 8 per cent, respectively on the BSE. Conversely, Varun Beverage and Procter & Gamble were among the losers, down between 0.1-3 per cent. 

ICICI Securities believe volume growth would recover for most FMCG companies on the back of a recovery in rural demand on the back of high agri sector growth with the normal monsoon in most regions.  

Moreover, price cuts, grammage restoration, and festive season offers would be reflected in higher volume growth in urban India, the domestic brokerage said in its report. It added with the softening of some commodity prices, gross margins would improve sequentially.  

The recovery in margin is expected to be slow given most FMCG companies would be looking to rise promotional offers and spend behind brands to focus on volume growth, ICICI Securities said. 

Similarly, SBI Securities also said in its report that the commodity prices and supply chain pressures have eased but remain at elevated levels. While palm oil has seen a meaningful correction from its peak some commodities like soda ash, milk powder, barley, and cereals have further inflated during this quarter.  

While the wheat prices went down in the international markets, the same was not the case in India as we had around 12 per cent lower crop than last year, the brokerage firm said, adding that some respite is expected in palm oil prices in the third quarter of FY23 on the cost outlook front.