FMCG stocks see monsoon cheer — why HUL is in focus
The Nifty FMCG index has given nearly 17 percent returns on a year-to-date basis, outperforming the benchmark Nifty50, which has given about 3 percent. The index, second-best after the auto space, hit its peak of 52,540.50 on June 16 and is now nearly 2 percent down from that. Here's what we can expect in the second half.
As the Indian stock market continues to flirt with all-time high levels, the Nifty FMCG (fast-moving consumer goods) index has also been on a roll, led by gains in consumer goods companies. Stocks in this sector are on a jolly ride in Dalal Street as monsoon has finally gathered pace. The Nifty FMCG index gained over 1 percent in Monday's (June 26) trade, with almost all constituents rising barring two or three companies.
Varun Beverages led the rally with over 4 percent gains, followed by Tata Consumer Products rising 2.50 percent. Colgate-Palmolive (India) and Emami were up 2.36 percent and 2.22 percent each, respectively. The index heavyweights ITC rose 0.12 percent, while HUL added 0.46 percent.
The Nifty FMCG index has given nearly 17 percent returns on a year-to-date basis, outperforming the benchmark Nifty50 which has given about 3 percent returns. Nifty FMCG is the second-best performing index after the auto space.
The index hit its peak of 52,540.50 on June 16, 2023, and is now nearly 2 percent down below that level. A favourable monsoon is critical for FMCG companies for revival of rural demand, which has been muted for the last few quarters. In the last quarter of the previous fiscal, even though FMCG firms saw positive volume growth, most of it was led by urban markets.
The arrival of the monsoon has been delayed in Kerala, but it may cover the entire country 10 days earlier than its normal schedule of July 8.
"The Southwest monsoon has further advanced into the remaining parts of Maharashtra, including Mumbai, Madhya Pradesh and Uttar Pradesh, Delhi, some parts of Gujarat, Rajasthan, and Haryana, remaining parts of Uttarakhand and most parts of Himachal Pradesh and some more parts of Jammu, Kashmir, and Ladakh, on June 25," the India Meteorological Department said in a statement.
Tech View
According to technical indicators, the rally in the Nifty FMCG index is done and dusted. "At the current juncture, the index has given a bearish divergence pattern in the weekly time frame. Weakness is possible till 48,000 if it fails to hold 50,500. Currently, it has huge resistance of around 52,500," technical analyst Dinesh Nagpal has said.
On the higher side, the index may fail to sustain above 52,500 levels. "Many components of the index are in the overbought zone, including Britannia and ITC. Only a decisive move beyond 52,500 will have bullish medium-term implications," said Anuj Dixit, Executive VP, Equity Research, at Sovereign Global.
Since March, the index has rallied 15 percent, with ITC, Hindustan Unilever and Britannia gaining close to 15 percent. ITC, which commands over 30 percent weightage in the index, has contributed to most of this rally.
For the second half of the year, volume growth will likely be in focus. There will be a clearer picture of demand as well, with the monsoon behind and the festive season ahead. About 5-10 percent volume growth is expected for the industry as well.
HUL in focus
Shares of Hindustan Unilever Ltd are in focus as Rohit Jawa is all set to take over the corner office at Hindustan Unilever tomorrow (June 26), the day after Sanjiv Mehta retires as managing director and chief executive officer. The stock settled 0.46 percent higher at Rs 2,653.70 apiece in trade today, snapping a five-day losing streak.
Known for transforming the consumer goods major's China and Philippines businesses, Jawa will serve as the chief of transformation in his London-based role. The 56-year-old Unilever veteran's career has spanned over 35 years since he joined as a management trainee in 1988.
In his new role as the MD and CEO of Hindustan Unilever, Jawa is expected to get an annual remuneration of Rs 21.43 crore, as per the company's annual report. He will also receive a sum of Rs 4.83 crore as mobility-linked allowances in FY24.
According to the annual report, Mehta’s salary was 164 times higher than that of an average HUL employee. Now, Jawa’s pay package will exceed what Mehta had received in FY23.
First Published: Jun 26, 2023 7:11 PM IST
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