Aam Aadmi’s welfare to fare well for FMCG
FMCG stocks favored as money exits PSU stocks. Strengthening consumer sentiment, rural market support are priorities for BJP.
On a day when the plunges over 5,000 points, one can trust the - especially the - to live up to their reputation as the rescuer of last resort.closed nearly 6% higher, 5.6%, over 3%, nearly 4.5%, over 3%, Britannia over 3%, and Tata Consumer Products 1.7%. Among the leading companies, ITC was the only one to close 2.4% lower - ahead of the crucial vote on the demerger of its hotel business.
With a weaker mandate, the agenda for the BJP-led NDA is likely to switch from growth to with the government being under pressure to roll out for boosting . In a bearish , the TINA (there is no alternative) factor burnishes the allure of otherwise defensive FMCG stocks.
According to a senior FMCG analyst who has tracked the sector for over two decades, there are two main reasons for the interest in FMCG stocks. "First, during uncertainty, tend to move from high beta stocks to low beta ones. Secondly, the upcoming may focus on stimulus measures and increase disposable income," he said.
Within the broad consumption theme, consumer staples are holding up while discretionary are down. For instance, the stock of Devyani International closed over 2.5% lower, Jubilant FoodWorks closed just 0.5% higher, Titan closed 0.6% lower and TTK Prestige closed 1.5% lower for the day.
"As there is no clear mandate for BJP, they will have to work on strengthening the consumer sentiment - especially providing support for rural markets," said Sachin Bobade, vice president-research at Dolat Capital. "In the stock market, the money that is exiting the PSU stocks is finding a safe haven in the FMCG stocks. And till the markets remain dicey, the FMCG stocks shall remain in favour."
According to Abneesh Roy, executive director at Nuvama Institutional Equities, the new government is likely to be more consumption-focused than earlier when it was more focused on capex and infrastructure. The pricing growth for consumer companies, which was negative in FY24, is likely to come back in FY25. Raw material prices are also benign - aiding profitability. The sector valuations are reasonable when compared to five years ago - especially for Dabur, HUL, Britannia, Marico and Asian Paints.
A good monsoon, a supportive budget and a surge in consumer demand ahead of the festive season are likely triggers for the buying interest in these stocks, which have seen subdued performance on bourses barring a few exceptions.
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Source: Stocks-Markets-Economic Times
