HUL, Britannia, Nestle gain up to 3%. Is this good time to buy FMCG stocks?

FMCG stocks in demand as government plans big GST rate reforms, marking the second major fiscal stimulus in FY26 after personal income tax cuts with an aim to boost consumption.

FMCG share price movement today

 

Shares of fast moving consumer goods (FMCG) companies were in focus and rallied up to 3 per cent on the National Stock Exchange (NSE) in Tuesday’s intra-day trade in an otherwise weak market. The Indian government has said that big GST rate reforms are on the way, marking the second major fiscal stimulus in FY26 after personal income tax cuts, which in turn is likely to boost consumption.

 

Britannia Industries, Hindustan Unilever (HUL) and Nestle India rallied in the range of 2 per cent to 3 per cent. ITC, Marico, Godrej Consumer Products, Tata Consumer Products, Dabur India and Colgate Palmolive were trading higher by up to 1 per cent.

 

At 12:39 PM; Nifty FMCG index, the sole gainer among sectoral indices, was up 0.91 per cent, as compared to 0.72 per cent decline in the Nifty 50. Since August 18, in the past seven trading days, FMCG has outperformed the market by soaring 3 per cent after the government proposed GST 2.0 reforms. The Nifty 50 index was up less than 1 per cent during the same period.   

Brokerages view on FMCG sector/GST 2.0 reforms

 

The government has proposed GST 2.0 reforms recently which aims to rationalize the current multi-slab structure into a simpler framework, with two main rates of 5 per cent and 18 per cent, and a higher 40 per cent slab for luxury and sin goods. The aim is to make products more affordable domestically and is likely to boost consumption especially amidst the approaching festive season.

 

Cut in GST rate will lead to reduced product price in the hands of end consumers resulting in improvement in the sales volume in the quarters ahead, analysts at ICICI Securities said. Key beneficiaries are Tata Consumer Products, Dabur India, Nestle India and Hatsun Agro, the brokerage firm said.

 

According to Motilal Oswal Financial Services, the GST Council is expected to meet on 3rd-4th September 2025 to finalize the new rate structure. If finalized, the new rates can be notified in a few days. This GST Council meet is likely to have been preponed to ensure that the industry does not lose the crucial festive season sales (beginning in September 2025). Once this proposal is passed by the GST Council, the rate change can be notified in a few days and the implementation date can be announced.

 

However, analysts at Ambit Capital see a negligible direct impact on consumer staples, as most of them fall within the 5 per cent/18 per cent slab, and a few large categories are present in the 12 per cent tax slab, which may be eliminated. Any change from 18 per cent to 5 per cent would be a positive, though. Amongst larger categories, juices, carbonated drinks and packaged foods could see a slab change - positive for Dabur and Nestle. Prima facie, sentimentally positive as other categories which might see tax decrease would lead to slightly higher in-hand income, but we await the fine print, the brokerage firm said.

 

The timing of GST reforms is apt and this potential policy stimulus along with personal income tax relief ($15bn), front-loading of rate cuts (100 bps CYTD), softer inflation (boosting purchasing power) and improved credit availability on regulatory easing should help buoy household consumption over the next 2-3 quarters, said Tanvee Gupta Jain, Chief India Economist at UBS Securities.

 

Looking ahead, analysts at Axis Securities maintain a constructive outlook for the FMCG sector. With rural inflation easing, higher MSPs, healthy monsoon projections, and increased government spending, the brokerage firm expects rural consumption to remain a key growth lever. Moreover, the upcoming quarters - particularly H2FY26 - are expected to bring about a more broad-based volume recovery, fueled by seasonal tailwinds, improved consumer sentiment, and monetary policy support.