FMCG: Investors should wait for correct valuations or demand to recover

The BSE FMCG index has underperformed the benchmark Sensex, by declining 10 per cent since February 1—the Sensex has dropped 2 per cent during the same time.

- DEVANGSHU DATTA

Fast-moving consumer goods (FMCG) majors may continue to be under pressure on weak demand and high inflation trends.

Ongoing weakness in urban consumption may continue, weighing down the value and volume growth of FMCG players in the ongoing January-March quarter (Q4) of FY25 and the first half of FY26.

Rural growth is stable, but not accelerating and will continue to contribute around one-third of FMCG industry sales. Inflation in palm oil, tea, and coffee may draw down margins. Nestle, Tata Consumers, and Hindustan Unilever (HUL) may thus see some pressure. Higher palm oil prices may impact soap players like HUL and Godrej Consumer Products (GCPL).

In the October-December quarter (Q3) of FY25, FMCG players posted a sluggish performance due to weak urban demand, lower uptake in the winter portfolio, and high palm oil prices.