Shares of Hindustan Unilever (HUL), Britannia Industries and Godrej Consumer gained between 3-5 percent on Wednesday as global crude palm oil prices continued to sink.
At 12:49 pm, shares of Britannia were trading 3.41 percent higher at Rs 3,782 while those of Godrej Consumer were trading 4.92 percent higher at Rs 873. Shares of HUL were up 2.95 percent at Rs 2,472.25 on the BSE.
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Crude palm oil futures on international exchanges have plunged more than 35 percent in the past few weeks on the back of resumption of exports from Indonesia as well as concerns over global demand.
On Wednesday, Malaysian palm oil futures plunged more than 8 percent, a near one-year low. The country has been seeing a rise in the production of palm oil.
On Tuesday, a Reuters poll showed Malaysia's end-June palm oil inventories had risen 12.3 percent since the month before, as exports plunged following Indonesia's return to the export market.
Also read: HUL shares recover from Indonesia’s refined palm oil export ban shock ahead of Q4 show tomorrow
Since crude palm oil is a critical raw material for domestic fast-moving consumer goods manufacturers (FMCG), the sharp decline in prices has come out as positive news for the FMCG stocks.
Deven Choksey of KRChoksey believes that companies like Marico and Godrej Consumer are facing a higher amount of pressure as far as a business environment is concerned, however, the best thing would be to play out this particular quarter as it comes and wait for the commodity prices to remain stable.
“Already the fall has taken place in food commodity and the positive impact should come somewhere at the end of this quarter, or maybe in the next quarter. So if that is working out then play out this quarter assuming the technique is going to be having a little negative impact on the company,” said Choksey.
In the wake of the Russia-Ukraine war and Indonesia's impromptu export ban earlier in the year, palm oil prices surged, causing FMCG stocks to decline sharply as investors feared worsening input price inflation.
Now the increased production, Indonesia’s plans to increase export quo and cut tax duty from $575 a tonne to $488 a tonne have aided the prices going down.
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