INSUBCONTINENT EXCLUSIVE:
FMCG major Hindustan Unilever (HUL) last week delivered a strong set of numbers for June quarter with double-digit growth across all three
But the FMCG index is not reflecting similar buoyancy
As much as 80 per cent of Nifty FMCG index components have given positive returns to investors in last one year, with Jubilant FoodWorks
rallying 123 per cent to Rs 1,419 as of July 16, 2018 from Rs 636 on July 17 last year
Shares of Britannia, United Breweries, Tata Global Beverages, PG Hygiene, Dabur India, GSK Consumer Healthcare, Marico, Colgate-Palmolive
and United Spirits have advanced between 4 per cent and 77 per cent in last one year
In comparison, the Nifty50 index has risen just 8 per cent since July 2017, compared with a 10 per cent gain in the Nifty50
So, what is putting pressure on the index when most of the stocks are trading in the green
Industry heavyweight ITC, which has a 40 per
cent weightage on the index, has capped the upside for it
The stock has dipped 16.47 per cent to Rs 271 on July 16 this year from Rs 325 on July 17 a year ago.
Kotak Institutional Equities expects
cent YoY decline with further deterioration in the product mix
report.
Godrej Industries and Emami, which together have a little above 2 per cent weightage in the index, dipped 13 per cent and 1 per
cent, respectively, during the same period.
Angel Broking says if one were to leave out the ITC effect, this index has been a stupendous
A combination of pay hike for central government employees and payouts to the retired army personnel in last two years has resulted in a
major jump in demand for FMCG products.
Companies like HUL, Britannia, and Colgate rely heavily on the rural market to boost sales
Assured minimum support price (MSP) at 150 per cent of the cost of production, massive infrastructure projects in rural areas and an
unprecedented rural employment generation programme have all been instrumental in propping up rural demand in a big way
sector since GST rollout will further support FMCG stocks in the coming months.
Deven Choksey, MD, KR Choksey Investment Managers, told
ETNow that the rural belt is showing higher demand because of availability of funds in the hands of the rural consumer.
As a result, FMCG
products will see relatively higher volumes as consumption picks up
But these numbers are not going to be beyond 15 per cent
The key lies in improving margins and that is what HUL is doing
He said GST rollout has been by and large very successful for many of these consumer companies
On one side, they have been able to destock inventories and avail working capital benefits
On other hand, just-in-time inventories into the system have helped them bring down costs
