The S&P BSE FMCG index was the top sectoral performer with nearly 2% gains. The index scaled a lifetime high of 16779.73 points on Friday.
Among stocks, shares of
, , , , Godfrey , , and Venky’s India were the lead gainers, adding 4-11% gains in the last week.
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Companies since early this year have grappled with skyrocketing commodity prices that not only hurt rural consumption and consequently sales volumes, but also the profitability.
The recent cool-off of prices and a good rabi sowing season has instilled hopes of a recovery in rural consumption. Rural markets make for more than 50% of the revenue of consumer staple companies.
Post the September earnings, management’s commentary on demand and margins was positive on the rural demand recovery and commodity cost moderation fronts.
As a result, earnings in the second half of the current fiscal year are expected to be better than the first half.
“When you see inflation starting to wear off, the entire fast moving consumer durable pack where you have smaller ticket sizes and which are more quasi 50% rural plays should start coming back,” Nitin Raheja of Julius Baer Wealth Advisors told ET Now in a recent interview.
As for the next week, technical analysts see more gains in store for the pack.
The FMCG index is still showing strength and indicating a continuation of the uptrend, said Ruchit Jain, lead research analyst at
5paisa.com.
However, some analysts are skeptical about the valuations in the sector given that earnings are yet to see a visible recovery.
According to
, the sector has seen a sharp increase in valuations over the last decade amid low interest rates.
While the outlook for FY24 is positive, driven by a moderation in raw material costs and signs of a rural recovery, consensus earnings estimates are too optimistic, it said.
“With no triggers for a sharp multiple de-rating, we believe some stocks can see time corrections over the next year,” it said in a recent report.
(With data inputs from Ritesh Presswala)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
