FMCG stocks continue to decline, slips to eight-month low

The enthusiasm around the reduction of income tax and cut in interest rate seemed  short-lived. The Nifty FMCG Index, which rallied nearly 5% on Budget day, erased all gains on Friday (February 7). The gauge for the fast-moving consumer goods has now come off 6% over the last five sessions.

Market participants are of the view that the inflation view of the Central bank and its neutral monetary policy stance have dampened hopes of further rate cuts. The Reserve Bank of India on Friday (February 7) lowered the policy rate by 25 basis points to 6.25% with Consumer Price Index (CPI) inflation for the current financial year projected at 4.8%.

Shares of ITC declined nearly 3% in Friday’s trade after the company’s revenue from FMCG business disappointed the Street. According to Jefferies, ITC’s December quarter performance was below its estimates but cigarette volume growth of 6% year on year was a key positive. “The revenue growth for FMCG business was at 4% year on year –the lowest print in at least 12 quarters —this was mainly due to muted demand conditions,” wrote Jefferies in an investor note.

Similarly, Britannia Industries, which reported its December quarter earnings on Friday, saw its shares decline by 2%. The company experienced an 11% inflation rate for the block of commodities it buys, led by refined palm oil and Cocoa. According to the company, the 11% inflation in commodities requires a 6.5% increase in price so that the impact can be balanced.Also read: Britannia shares fall as company plans 4-4.5% price hike by FY25-end

With the Friday’s fall, the Nifty FMCG index is down by 3.2% so far in 2025. Additionally, the index had declined 0.3% in 2024 to mark its first decline in five years.

Shares of Radico Khaitan lead the pack of losers in 2015. The stock of liquor producer has corrected 14% so far this year, which was follwed by  Varun Beverages, Balrampur Chini Mills and Unties Spirits with each losing  nearly 13% during the same period.