Earnings upgrade, valuation uptick for consumer majors

Analysts are turning their attention to the fast-moving consumer goods (FMCG) sector for several reasons.

- DEVANGSHU DATTA

Management commentary during Q4FY24 earnings calls cited rural demand pickup, distribution expansion, new launches among others which led to some expectations of volume recovery.

Most analysts see volume expansion in single digits but the emergence of several positive factors could support double digit growth.

As a result, many FMCG stocks have seen price recovery since Q4 results. Post elections, there's been more attention on the sector due to belief that the new political coalition will focus policy on rural pain points, leading to moves that boost rural disposable incomes and hence, boost consumption demand. Volume growth expectations have thus grown stronger as rural growth has underperformed in the last two financial years.

Recent declines in crude prices can also boost gross margins. There could be gains as inflation in other raw materials has moderated although it is still a noticeable factor. A good monsoon could be another positive driver.