FMCG stocks rally: Colgate, GCPL, Dabur surge on GST rate rejig reports

The FMCG index climbed up to 1.7 per cent before easing to trade 1.2 per cent higher at 9:50 AM, while the Nifty50 slipped 0.04 per cent

Shares of fast-moving consumer goods (FMCG) companies rose in Friday's muted trade amid reports that the Group of Ministers has finalised cutting Goods and Services Tax (GST) on these products to 5 per cent.

 

The gauge of the consumer stocks -- Nifty FMCG -- was the top sectoral gainer in trade, led by gains in Colgate-Palmolive (India), Godrej Consumer Products and Dabur India. The FMCG index climbed up to 1.7 per cent before easing to trade 1.2 per cent higher at 9:50 AM, while the benchmark Nifty50 slipped 0.04 per cent. 

 

Shares of Colgate rallied as much as 4.2 per cent, while Godrej Consumer and Dabur India rose 2.35 and 2.86 per cent, respectively, in Friday's intraday session. Stocks such as Britannia Industries (up 3 per cent), Hindustan Unilever (up 2.5 per cent), Nestle India (up 1.89 per cent), and ITC (up 1.8 per cent) were all trading higher. All 15 stocks in the Nifty FMCG index, except Uniter Breweries, were trading with gains. 

 

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Consumer goods to see GST cuts 

According to news reports, the GST is likely to be reduced on several consumer goods. Rates may be cut from 12 per cent to 5 per cent on items such as tooth powder, feeding bottles, tableware, kitchenware, umbrellas, utensils, sewing machines, bicycles, bamboo furniture, combs, as well as on hand carts and rickshaws. 

 

Similarly, products like talcum powder, face powder, hair oil, shampoo, toothpaste, dental floss, soap, and toothbrushes may see a reduction from 18 per cent to 5 per cent, as per a CNBC report. 

 

The government earlier this month proposed GST 2.0 reforms recently which aim to rationalise 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 GoM last week accepted the centre’s proposal. 

 

This comes in addition to the income tax relief provided under the new tax regime in the last Union Budget 2025-26, in potential savings of ₹1 trillion for taxpayers.  

 

Analysts on FMCG sector outlook

Motilal Oswal said a consumption revival would benefit discretionary companies as well, but the impact is expected to be stronger for fast-moving consumer goods (FMCG) firms, which have faced the sharpest slowdown in demand. The brokerage added that it continues to prefer Hindustan Unilever (HUL), Godrej Consumer Products (GCPL), and Marico in the staples space.

 

While a consumption revival will benefit discretionary companies as well, FMCG companies are expected to show superior sensitivity due to their significant impact from the recent downturn and reduced expectations, according to the brokerage. A promising start to the monsoon season, a rebound in rural wages supported by easing inflation, and increased government expenditure are laying the foundation for a broad-based rural revival, the report said. 

 

Meanwhile, the 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.