FMCG stocks have given handsome returns to investors in 2022. The Nifty FMCG index has jumped by 20.5% so far this year, as compared to the 3.7% rise in the Nifty50 during the same period. What’s fuelling this stock rally? Let’s unpack this.
Mixed bag results
During the first quarter of FY23, most FMCG companies reported mixed results, reporting a margin impact due to high commodity prices. To overcome the cost inflation, most FMCG companies raised prices of their products, which led to subdued volume growth.
Softening of commodity prices
However, in the past few months, prices of major commodities such as palm oil, packaging material and crude oil have eased. Prices of palm oil, one of the most widely used commodities in the FMCG industry, have declined by over 46% from its April peak.
Market experts believe that the cumulative impact of price hikes and falling commodity prices will start benefiting the FMCG stocks in the upcoming quarters.
Demand revival on cards
The management commentary from top FMCG companies is also confident about a demand revival supported by normal monsoon across the country, which will boost rural consumption. Further, high demand during the ongoing festive season will act as a trigger for volume growth.
While FMCG stocks got investors excited, will they be able satiate their appetite? We’ll have to wait and watch.
Download the Upstox App Today