Nifty FMCG index hits six-week low; ITC, Godrej Consumer down 2%

Shares of fast moving consumer goods (FMCG) companies were under pressure with Nifty FMCG index hitting its six-week low, falling 8% so far in the current month on the National Stock Exchange (NSE) on valuation concerns.

ITC, Godrej Consumer Products, Colgate Palmolive (India), Hindustan Unilever (HUL), Marico and Jubilant FoodWorks among the key FMCG stocks that are trading lower in the range of 1% to 3% on the NSE.

The Nifty FMCG index, the sole loser from the sectoral indices, lost 1.7% at 30,288 in intra-day trade, as compared to 0.03% rise in the Nifty 50 index. The FMCG index hit an intra-day low of 30,239, its lowest level since July 26, 2018.

Thus far in September, the FMCG index underperformed the market by falling 8% against 2% decline in Nifty 50 index. The index had rallied 23% against 11% rise in benchmark index so far in the calendar year 2018, till September. It hit an all-time high of 33,168 on September 3, during intra-day trade. 

Analysts say the stocks are facoring in most positives that are likely to accrue from a pick-up in rural sales going ahead.

“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.

“While consumer staples in India have always been a structural story and hence, stocks always command a premium, the extent of PE expansion recently has probably surprised the most bullish of investors,” analysts at CLSA said in consumer sector outlook note.

Comparing valuations with other Indian plays, the Nifty, regional & global names suggests Indian consumer staples are among the most highly valued in the world, and in some cases, even higher than next-gen technology companies like Amazon and Alibaba, it added.

"Consumer sector PE multiples are near all-time highs in most cases as our coverage (ex-ITC) trades at a  41.9x PE compared with 34x 5-years back & 24x 10-years ago. There are of course exceptions, like ITC and GSK, where their PEs are more palatable, consequent to concern over growth potential, but in most other cases, PE has expanded to highest-ever levels," the brokerage firm said.

Company 31/08/2018 LTP % chg
Godrej Consumer 1452.15 1262.75 -13.04
HUL 1780.10 1580.35 -11.22
Jubilant Food. 1549.35 1379.00 -10.99
Britannia Inds. 6736.75 6051.25 -10.18
Marico 369.45 337.45 -8.66
Godrej Inds. 646.65 598.90 -7.38
GlaxoSmith C H L 7705.45 7168.15 -6.97
Dabur India 478.75 446.15 -6.81
ITC 319.85 298.45 -6.69
United Breweries 1404.10 1315.50 -6.31
United Spirits 630.25 591.75 -6.11
Colgate-Palm. 1169.00 1108.90 -5.14
Tata Global 234.30 223.00 -4.82
P & G Hygiene 10271.75 10000.00 -2.65
Emami 564.65 555.00 -1.71
Nifty FMCG 32911.55 30188.30 -8.27
Nifty 50 11680.50 11424.95 -2.19


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