Budget Day winner - FMCG index - lags recent rally

The Finance Minister's Budget announcement on July 6, 2009 saw the markets crash over 860 points (6%). However, the FMCG sector, on hopes of benefitting from a strong rural focus, ended in the green. The index went against the broader trend and added 22 points or nearly 1% to end at 2,312.

All other indices dropped on Budget Day. The worst hit was the bankex, which slumped over 8% to 7,769. The realty and capital goods indices tumbled 7% each to 3,185 and 12,100, respectively. Some of the indices were able lessen the impact and fell only 2-3%. The BSE consumer durables and healthcare indices slipped 2% each. The IT and Auto indices shed around 3% each to 3,236 and 4,460, respectively.

The government's decision to increase outlays for the National Rural Employment Guarantee Scheme led many to believe that consumer-focused industries would gain from the Interim Budget. The FMCG sector, which gets more than half of its revenues from rural India, was most likely to gain.

The Sensex has added 3,091 points or 22% in the same period, recently touching its high in more than 16-months.
 
The irony lies here. The sector has been the worst performer in the months following the Budget.The BSE FMCG index has managed a thin gain of 12%, higher only than the power index which added 11.5% in these three months. As on October 1, 2009, the FMCG index was at 2,592 - up 280 points from the close on Budget Day.

Surprisingly, the three best performers include the BSE auto, IT and realty indices. The auto index surged 48% in the last three months on the back of good quarterly numbers and sales figures. The IT index added 42.5% to 4,611. The realty index, one of the weaker performers on Budget Day, has gained 42% to 4,508.