Nifty FMCG index hits fresh record high; Nestle, Godrej Consumer rise 3%

Shares of fast-moving consumer goods (FMCG) companies were in focus on Thursday with the Nifty FMCG index hitting a fresh record high of 33,673 points on the National Stock Exchange (NSE) in an otherwise weak market on renewed buying interest from investors.

At 12:52 pm, the Nifty FMCG index, the sole gainer among the sectoral indices, was up 1.5 per cent at 33,613 points, as compared to a 0.72 per cent decline in the benchmark Nifty50 index. The FMCG index hit a high of 33,183 on Wednesday, surpassing its previous high of 33,168 recorded on September 3, 2018.

Jubilant FoodWorks, Godrej Consumer Products, and Nestle India from the index were up 3 per cent, while Tata Consumer Products, Dabur India, Britannia Industries, Hindustan Unilever, Colgate Palmolive (India), and ITC were up in the range of 1 per cent to 2 per cent on the NSE.

After two consecutive quarters of revenue decline, FMCG companies witnessed strong growth in the July-September quarter (Q2FY21), given a large part of supply disruption got mitigated. On the demand front, packaged food, immunity-boosting products continue to grow at a faster pace.

ICICI Securities believes some packaged foods (pulses, atta, tea, biscuits) categories would continue to witness a consumption shift from unbranded to branded products. "Moreover, we believe some businesses like Dabur (ayurveda, naturals, immunity), ITC (FMCG), Tata Consumer Products (India), Marico (foods) would be outliers and would witness structural growth in immunity-boosting and packaged foods category," the brokerage firm said in Q2FY21 earnings wrap.

Among individual stocks, ITC was up 1 per cent at Rs 208, surging 17 per cent in past one month. The stock of the FMCG major was trading at its highest level since July 3, 2020. The foreign brokerages have maintained a positive outlook on the company based on the company's recovery prospects and best-in-class ESG (environmental, social, corporate governance) measures.

According to analysts at Credit Suisse,  ITC's diversified portfolio of multiple strong brands is poised to continue its double-digit revenue growth trend over the next three years. As regards ITC's cigarette business, analysts expect a gradual recovery in cigarette volumes and EBIT (earnings before interest and tax), as consumers work more from office and there is an increase in socialising occasions post complete unlocking of the economy.

Nestle India gained 3 per cent to Rs 18,152, and was trading close to its all-time high of Rs 18,301, touched on April 17, 2020. In the past one month, the stock has risen 9 per cent, as compared to a 6 per cent rise in the Nifty50 index. The country’s largest food company, Nestlé India, is planning to avail the Union government’s production-linked incentive (PLI) scheme to boost exports.