FMCG stocks climb on FM's strong rural push

Shares of seven FMCG stocks rose 0.83% to 6.21% after the Union Budget provided the thrust on rural development.

Nestle India (up 6.21%), Britannia Industries (up 5.77%), Hindustan Unilever (HUL) (up 5.10%), Dabur India (up 2.38%), Colgate-Palmolive (India) (up 2.37%), Marico (up 0.90%) and Godrej Consumer Products (up 0.83%) edged higher.

The Nifty FMCG index rose 1.27% to 30,580, outperforming the Nifty 50 index, which was up 0.33% at 11,700.20.

In the Budget speech, FM Nirmala Sitharaman said, "Our government is committed to the goal of doubling farmers' incomes by 2022. We have provided energy sovereignty through KUSUM and input sovereignty through Paramparagat Krishi Vikas Yojana. We have provided resilience for 6.11 crores farmers insured under PM Fasal Bima Yojana. Focus on cultivation of pulses, expansion of micro-irrigation through Krishi Sinchai Yojana, have raised the self-reliance of the country. Provision of any annual supplement of the income to the farmer, directly is done through PM-KISAN. Connectivity through PMGSY, financial inclusion have helped raise farm incomes."

The special thrust on agriculture, irrigation and rural development should fuel growth in a struggling rural economy, where FMCG growth has slowed down.

For the sector comprising of agriculture and allied activities, irrigation and rural development an allocation of about Rs 2.83 lakh crore has been made for the year 2020-21. It is divided for agriculture, irrigation & allied activities (Rs 1.60 lakh crore) and for rural development & Panchayati Raj (Rs 1.23 lakh crore).

FM proposed to provide Rs 35,600 crore for nutrition-related programmes for the financial year 2020-21. Meanwhile, customs duty on peanut butter and skimmed milk & milk products has been withdrawn.

FM said that the government shall facilitate doubling of milk processing capacity from 53.5 million MT to 108 million MT by 2025.

FMCG stocks also rose on expectations that a reduction in income tax slabs (without exemptions/deductions) could spur consumption.

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