FMCG stocks soar high

Higher salaries and strong consumer spending have facilitated such a rise

With the Sensex returning to rally mode gaining 6.51% in the last five sessions, more than two dozen stocks hit their lifetime highs on Wednesday. Among them was cigarette and consumer major ITC, which is looking to treble its FMCG turnover (excluding cigarettes) to Rs 15,000 crore in the next five years. Shrugging off the weatherman's slightly less-than-normal monsoon forecast, several FMCG stocks including Colgate and Marico hit new highs. The BSE FMCG Index has now risen 6.36% over the last five sessions.


However, there are those who believe that the economic slowdown could hurt consumption. In a recent report, Nomura observed that the slowdown was starting to become widespread as data from auto companies suggest growing demand sluggishness.


Godrej group chairman Adi Godrej recently observed that the industry expected a normal monsoon with a good crop and therefore, better demand. “The FMCG sector will definitely have a good growth this year,” he said.


Thomas Varghese, chairman, CII national retail committee and CEO, Aditya Birla Retail, observed that the demand for basic FMCG goods is still strong especially in discount stores. “However, there is definitely a cutback in spends on apparel, consumer durables and electronics and these are the lead indicators of a slowdown,” Varghese said.