FMCG shares under pressure; HUL falls 9% in two days

Shares of fast moving consumer goods (FMCG) companies were under pressure for the second straight day with the sector major Hindustan Unilever (HUL) slipping 9% in past two trading sessions.

Jubilant FoodWorks, Dabur India, Nestle India, Britannia Industries, Godrej Consumer Products, Marico, and ITC were trading lower in the range of 2% to 5% on the National Stock Exchange (NSE).

At 11:05 am; Nifty FMCG index, the largest loser among sectoral indices, down 2% at 31,420 points. The FMCG index has fallen 4.5% in past two trading days, as compared to 1% decline in the Nifty 50 index.

Thus far in the calendar year 2018 (CY18), most of these stocks have outperformed the market, with FMCG index rallied 23% against 11% gain in the benchmark index till Friday.

HUL, Nestle India, Godrej Consumer Products, Dabur India, Britannia Industries, Jubilant FoodWorks and United Breweries had surged in the range of 30% to 75% during the period. The rally in FMCG stocks on expectations of rural revival, normal monsoon prediction, stabilization of trade channels and increasing direct reach by the companies.

Among the individual stocks, Jubilant FoodWorks was the largest loser among Nifty FMCG index, tanked 6% to Rs 1,437 on the NSE. The stock hit an all-time high of Rs 1,578 on August 28, zoomed 75% in CY18 till Friday.

HUL slipped 4.4% to Rs 1,624 in intra-day trade, extending its previous day’s 4.5% decline on the NSE. The stock hit a record high of Rs 1,809 on August 20 in intra-day trade.

HUL expects government spending plans such as increases to Minimum Support Price (MSP), provision of health insurance, etc. to bolster rural development and drive consumption. A normal monsoon, as forecasted, will help the overall economy.

“Crude oil led inflation, emerging global events and disruptions, if any, from state elections are potential headwinds which need to be managed carefully,” the company said in an annual report.

Dabur India said, while there are some near-term inflationary pressures and challenges due to the increase in prices of crude oil and other raw materials, overall consumer demand is resilient and the consumer industry is expected to grow at a good pace in the medium to long-term.

“With demand drivers and supply chain in place, a number of FMCG companies are trading at higher valuations factoring in most of the positives”, analysts at IIFL Securities said in sector update.

However, we believe there are few pockets which provide investment opportunity at current valuations. We believe that the companies with low PE (vs. other FMCG majors) and growth visibility (rural recovery, trade stabilization, etc.) still have their run left, the brokerage firm said in a report.

JUBILANT FOOD. 1444.75 1526.25 -5.34
HIND. UNILEVER 1638.50 1699.10 -3.57
DABUR INDIA 450.95 466.35 -3.30
GODREJ INDS. 614.50 629.95 -2.45
BRITANNIA INDS. 6422.20 6565.85 -2.19
UNITED BREWERIES 1351.50 1381.40 -2.16
GODREJ CONSUMER 1409.00 1433.55 -1.71
ITC 308.10 313.20 -1.63
TATA GLOBAL 233.20 236.70 -1.48
COLGATE-PALM. 1160.40 1174.65 -1.21
MARICO 357.85 361.00 -0.87