FMCG stocks gain amid sell-off

Nifty50: 16,450 ▼118 (-0.7%)
Sensex: 55,329 ▼300 (-0.5%)

The markets opened with a strong gap-down and the weakness persisted throughout the day with 42 of the Nifty50 stocks closing in the red. 

Nifty FMCG (+2.2%) was the only sectoral index to post gains today, while Metal (-6.4%) and Media (-3.7%) were the top losers.

Here are the top stories of the day.

FMCG companies raise prices

In a bid to offset input costs, FMCG majors such as Britannia and Godrej have reportedly raised prices of their products. While inflation has hit commodities across the board, palm oil—used in industrial baking and making soaps & cosmetics—is a sore point. This is because of high global demand and the second wave impacting palm oil producing countries like Malaysia and Indonesia.

The companies intend to do a balancing act of increasing prices and controlling costs to preserve sales volumes, especially in the wake of the upcoming festive season. The Nifty FMCG (+2.2%) was the sole sectoral index to close positively today and HUL (+4.8%), Britannia (+4.1%) and Godrej Consumers (+2.8%) were among top gainers.

CarTrade makes a weak debut

Shares of the multi-channel auto e-commerce company listed at about 1% below their issue price of ₹1,618. The stock continued to weaken throughout the day amid a weak market and closed 6.8% lower. 

The stock couldn’t generate investor interest on listing even though the IPO was oversubscribed 20 times. This is the second issue, after Windlas Biotech, in the last three months that saw listing losses.

Ujjivan SFB’s shares tumble

Ujjivan Small Finance Bank’s (SFB) shares plunged after the resignation of its MD and CEO Nitin Chugh. This comes at a time when it is facing asset quality problems. The lender’s non-performing assets (NPA) rose to 9.8% of the overall loan book in Q1FY22 from 0.9% in Q1FY21. 

Further, the SFB is also facing a high attrition rate with exits at various levels in the organisation, as per reports. In backdrop of this, shares of the Ujjivan SFB dropped by 18.5% today. Share of its parent Ujjivan Financial Services also fell by 12.5%. 

Closing bell

At the moment, there is more fear than greed in the markets. Some of the reasons that are fueling this fear include the geopolitical tension in Afghanistan, the risk of the US Fed tapering the stimulus, and falling metal prices questioning demand to name a few. During such times, a weak IPO listing is also capable of spoiling the general market sentiment. In such a scenario, a strong rise in the defensive FMCG sector stocks confirms the investor’s view about the markets. 

Meanwhile, there are no major domestic data releases and the Indian markets could take cues from the US’ GDP figure for the June quarter. This number will not only show the state of the US economy but also could indicate whether the US Fed will continue to boost the economy. It will also be looked at in the context of the sudden rise in the number of new cases in the US.

Good to know

What is an option premium?
An option premium is the price of the options contract. It is the money which an option buyer pays to an option seller. The options premium is determined by factors such as underlying stock price compared to the option strike price, time to expiration and how much the price fluctuates. In terms of returns, an option premium is the maximum a buyer can lose or a seller can gain.

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