FMCG shares gain in weak market; Dabur, Colgate, Marico, HUL surge up to 5%

With improved macroeconomic indicators, enhanced government spending and a favorable monsoon forecast, the upcoming year holds promise for a gradual uptick in consumption sentiment, analysts believe.

Shares of fast moving consumer goods (FMCG) companies are trading higher by up to 5 per cent amid heavy volumes in otherwise a weak market on expectation of healthy outlook.

Dabur India, Colgate- Palmolive (India), Marico, Hindustan Unilever (HUL), Emami and Britannia Industries are up in the range of 2 per cent to 5 per cent on the BSE in Tuesday’s intra-day trade. In comparison, the BSE Sensex was down 2.4 per cent at 74,672 at 10:31 am.

With improved macroeconomic indicators, enhanced government spending, a favorable monsoon forecast, moderate retail inflation and reduced volatility in commodity prices, the upcoming year holds promise for a gradual uptick in consumption sentiment across both urban and rural, Marico had said in Q4FY24 earnings call.

Shares of Marico are up 3.4 per cent to Rs 614.90 in intra-day trade today. The average trading volumes on the counter more than doubled with a combined 3.66 million equity shares have changed hands on the NSE and BSE.

Among the other stocks, Dabur India rallied 5 per cent to Rs 573.20 on back of nearly five-fold jump in average trading volumes. A combined 5.69 million have changed hands on the NSE and BSE.

As rural growth revives, Dabur is well-positioned to leverage on rural growth, as it has made strong infrastructural investments in rural markets, according to analysts.

Management remains optimistic on overall improvement in consumption trends for the coming fiscal, led by normal monsoon (expected), improving macro conditions, infra/government spending and moderated inflation.

The company’s performance was resilient in a volatile environment, with domestic volume growing 4.2 per cent year-on-year (YoY) in March quarter (Q4). Management noted that Dabur’s rural markets grew ~400 bps ahead of urban markets (8 per cent and 4 per cent, respectively), marking a significant improvement from Q3 (rural lagged urban markets by 200 bps), analysts at Kotak Institutional Equities said.

In the near term, HUL expects gradual demand recovery, aided by increased government spending, improving macro indicators, better monsoon (above normal forecast) and better crop realizations. Net-net, HUL expects volume recovery to remain gradual. Management noted that rural recovery is contingent on three factors agri income, labor income, and repatriation income. The proposed increase in government capex can positively impact labor and repatriation incomes, while agri income will be largely monsoon dependent, the brokerage firm said. Shares of HUL are up 3 per cent to Rs 2,427 on the BSE in intra-day trade.