FMCG stocks get a boost from improving prospects; analysts are bullish

Despite high valuations, analysts are bullish and upgrading targets on the back of volume and margin gains for companies

The FMCG sector is generally considered to be a safe haven during difficult times as people never stop buying soap and toothpaste. However, weak rural and semi-urban demand has been a factor since the lockdowns of 2020-21 while rising inflation has also impacted margins. While the FMCG majors have survived on the basis of price hikes and good management practices, they have seen growth slowdowns and experienced margins being squeezed as raw materials and transport costs rose.

The FMCG sector witnessed positive volume growth in the fourth quarter of the 2022-23 financial year (Q4FY23) after five consecutive quarters of decline,