ITC has been one of the best performing large-cap stock at the bourses thus far in calendar year 2022 (CY22), rallying nearly 52 per cent during this period and outperforming the sector benchmark - the S&P BSE FMCG index - by a wide margin that moved up around 17 per cent during this period. However, the counter has lost over 5 per cent from its recent high of Rs 346.25 hit on September 23, 2022 and has underperformed the S&P BSE Sensex, which has lost nearly 2 per cent since then. So, is the rally in the stock coming to an end, and is this a good time to book profit?
Despite near-term headwinds of rising input costs and the possibility of lower demand for products as Covid dented rural & urban India, and impacts both production & consumption, analysts remain bullish on stocks of fast moving consumer goods (FMCG) companies and expect the index to relatively outperform its peers in the second half of fiscal 2021-22 (FY22). In the past one year, prices of key commodities such as groundnut oil, mustard oil, Vanaspati, soya oil, sunflower oil and palm oil have shot up in the range of 20 per cent to 60 per cent, data show. The FMCG sector macros in this backdrop, according to analysts, have further deteriorated because of weakness in consumer demand and likely margin pressure due to elevated crude oil, palm oil and global food prices.
Almost 40 per cent of a durable company's sales are achieved during the festival season
While weather forecasters remain divided on how the monsoons will play out in India over the next few months, analysts believe the news at the current juncture - at best - can trigger a knee-jerk reaction in the markets. They believe it is too early to say whether the sub-par monsoon on account of El Nino can seriously dent the market sentiment in the short-to-medium term. "These are just initial forecasts and we will have another round / status update from the weather forecasters a month down the line.
Over two dozen companies have announced bonus issue so far in 2017
The rupee's slide to a two-year low will impact consumer durables and electronics companies, as the import content in their products tends to be high
Consumer durable companies will again start to face a supply issue of components as China extends lockdown due to its zero Covid strategy. This will impact the flow of finished products into the Indian market, unlike last year, this impact will be felt post Diwali. While supply chain issues have been a problem since the start of the pandemic, China's zero Covid strategy has also posed another risk for consumer durable companies.
"India will be home to a fifth of humanity, its economy 16 times bigger than today, and one of the world's largest consumer markets. India will be a world better in many areas"
November IIP data show a fall of over 20%, led by automobiles, gems & jewellery and home appliances; turnaround seen as unlikely.
Prices of all metals - from steel to copper, aluminium, zinc and lead - have shot up by about 5-11 per cent in the past month. Commodity inflation is raising its head, forcing companies to consider price hikes.
Asset financing firms are still witnessing subdued demand and meaningful recovery is likely only in FY16, the report said.
The first to see price hikes will be soaps. In the past six months, domestic palm oil prices have increased by 46 per cent. Palm oil is a key input going into soaps.
Delay in demand recovery and higher stock valuations mean low safety margin, say analysts.
The Adani group has the maximum number of companies in the trillion club at five, followed by the Tata group (four).
Global funds, according to Christopher Wood, global head of equity strategy at Jefferies, are now beginning to pay more attention to India with the market now offering 30 companies with a market capitalisation over $25 billion.
The brokerage, which previously had a target of 31,000, cited global growth concerns for revision in the target.
The Indian companies, however, invested a much lower $1.59 billion in overseas markets in the previous month May 2014.
FCMG companies which have plants i Npal may take a hit on revenues.
FMCG CEOs indicate that the market should stabilise post the general elections and that some growth should make its way back especially in rural areas
'The impact of CEO transition is fairly even for stocks, with about half (53 per cent) of the events not producing any change in the relative performance of the stock.'
But return on equity deteriorated for 7 of the 12 firms analysed.
Kamal Nandi is a relieved man. As vice-president (sales & marketing) of Godrej & Boyce Manufacturing, Nandi has been seeing sales back on track for the last two months.
As the second wave of the pandemic ebbs and the daily caseload falls, the struggles of the urban poor have come into focus. Many have suffered income and job losses after two successive waves. The second wave, in particular, has seen the poor being hit hard on account of lack of medical and financial help. For the fast-moving consumer goods (FMCG) companies this has meant that an important segment is under severe distress.
Anticipation of weak sales this festive season due to deficient monsoon, especially outside big cities.
Increase in tax exemption limit by Rs 50000 is positive for the FMCG sector, as it will leave more discretionary income in the hands of consumers.
From paints to apparel and lifestyle majors, brewers, distillers and fragrance makers have stepped into the market, even as the frontline companies including FMCG players, pharma and healthcare majors were the first to seize the opportunity created by Covid-19.
The latest hike is likely to be followed by another such move next month, said industry players. Before the latest hike, companies had initiated price hikes to the tune of 12-13 per cent in 2021 but they weren't able to fully cover the increase in costs.
The S&P BSE Realty Index has emerged as one of the top-performing sectors, yielding a remarkable 45 per cent return over the past six months. The three leading players, listed by market capitalisation, have substantially enriched investor wealth by 43-70 per cent during this period. If the second quarter (Q2) of 2023-24 (FY24) updates from Macrotech Developers (Lodha) and Sobha, along with industry data for the quarter, serve as any indication, the trend of strong bookings for larger players is expected to continue.
Data from market research agency Nielsen shows that 152 new players entered the hygiene market in March as the lockdown was implemented to contain the spread of the coronavirus disease. The trend is expected to continue, the agency says, as hygiene and health emerge as key themes.
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Women leaders, succession planners and lawyers say doors in family businesses are opening but a stronger push is needed.
"The December and February stimulus packages, which included a cumulative 4 percentage point excise duty cut, have helped the industry register this growth," said Nandi, adding that the festive season would bring more cheer, unlike last year, when the slowdown was taking effect.
A third of FMCG sales and half of motorcycle sales come from the hinterlands
While the government's demonetisation move is aimed at curbing under-invoicing, the worry was that retailers would de-stock in the short term, impacting sales.
The combined dividend payout by early-bird companies -- those that have declared their results for FY21 -- is up 8.9 per cent, lower than the 21.9 per cent rise in in FY20 but ahead of the underlying growth in India Inc business last year. Combined net sales of these early birds were down 1.8 per cent last financial year while net profit was up 27.3 per cent in FY21. Some top companies that have stepped up dividend payout in FY21 include Hindustan Unilever, Indus Towers, Tata Steel, Ultratech Cement, Larsen & Toubro, Dabur, Asian Paints, and UPL. In contrast, banks have skipped dividends under an RBI diktat while companies such as Marico, TCS, Maruti Suzuki, and Godrej Consumer are paying lower dividends for FY21.
Softening rural consumption and the likelihood of weak corporate earnings in the March quarter saw investors dump stocks.
Despite slowdown, smaller firms attract growth capital.
Industry officials say the crunch has not only affected manufacturing of edibles but even of items like nozzle pumps and other goods used in packaging.
Inflation and asset prices have eroded the value of money.
Natures Basket's acquisition will make Spencer's Retail a national player, giving it access to the western parts of India through its 36 stores in prime locations in Mumbai, Pune and Bangalore.
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