FMCG shares gain as Cabinet clears MSP for khariff crops; HUL hits new high

A woman shopping at a supermarket
Shares of fast moving consumer goods companies (FMCG) have moved higher by 12% after the Cabinet Committee for Economic Affairs on Wednesday cleared an increase in the Minimum Support Price (MSP) for kharif crops for the 2018-19 season.

Kohinoor Foods, LT Foods, IFB Agro Industries and Radico Khaitan from the S&P BSE FMCG index were up in the range of 5% to 12% on the BSE.  Gillette India, Bajaj Corp, Kaveri Seed Company, Colgate-Palmolive (India) and Jyothy Laboratories up between 1% and 3%, while Hindustan Unilever up 2% to Rs 1,673, hit a new high on the BSE.

The price at which the government procures common rice variety was increased by Rs 200 a quintal, about a 13% hike over last year's price of Rs 1,550 per quintal. The MSPs of coarse cereals that include jowar, bajra and ragi have seen hefty increases of up to Rs 900 a quintal. The current MSP of ragi is Rs 1,900 a quintal, the Business Standard reported. CLICK HERE TO READ FULL REPORT

“Historically, growth in private final consumption expenditure (PFCE) relates well with growth in non-durable goods with a ratio of about 1-1.2 times on an average. Therefore, going forward, with the nominal GDP expected to be at 12.5%, and private final consumption expenditure expected to be at around 12-13%, CARE Ratings expects the FMCG industry to register a growth of about 14-16% in FY19,” CARE Ratings said in recent report.

The Government of India has also been supporting the rural population with higher minimum support prices (MSPs), loan waivers to farmers and disbursements through the Mahatma Gandhi National Rural Employment Guarantee Act (NREGA) programme. These arrangements have empowered the rural masses and increased their purchasing power, thus boosting FMCG consumption, added report.

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