FMCG shares gain on govt's relief package; Marico, Godrej Consumer up 8%

Shares of fast moving consumer goods (FMCG) companies gained up to 8 per cent on the National Stock Exchange (NSE) on Thursday after Finance Minister Nirmala Sitharama announced economic package to deal with Covid-19 impact.

The government would provide a relief package of Rs 1.7 trillion under the Pradhan Mantri Garib Kalyan Scheme to the underprivileged, poor and migrant workers affected by a lockdown amid the Covid-19 crisis.

Among individual stocks, Marico and Godrej Consumer Products have moved higher by up to 8 per cent, while ITC, Hindustan Unilever, Emami, Dabur India, Colgate Palmolive (India),  and Birtannia Industries were up in the range of 5 per cent to 7 per cent on the NSE.

At 02:45 pm, Nifty FMCG index was up 5 per cent, bouncing back 6 per cent from intra-day low on the NSE. In comparison, the benchmark index Nifty 50 was up 3.6 per cent at 8,617 points.

According to Crisil Ratings, an expected recovery in rural demand, coupled with steady urban demand, is set to lift revenue growth of the Rs 4-trillion FMCG sector to 10-11 per cent in fiscal 2021, close to the levels witnessed in fiscal 2019.

This fiscal, sales of FMCG products have been impacted by slack rural demand and the liquidity squeeze that affected wholesale channels. Rural demand, which accounts for just under a half to the sector’s revenue, slowed down considerably in the first half of current fiscal, following lower crop production and moderation in agriculture GDP to 2 per cent.

Rural demand is expected to recover gradually from March-April 2020, riding on an increase in farm incomes. Given better storage levels in reservoirs (40 per cent higher than the long period average as on January 16, 2020) after a good monsoon, better rabi output (7-8 per cent on-year increase), and good visibility for the upcoming crop seasons, Crisil Ratings said in recent FMCG sector update.