NIFTY FMCG gains nearly 3% despite volatility in broader market; HUL, Dabur jump up to 7%

Benchmark indices, NIFTY and SENSEX, plunged to the negative territory in morning deals on Tuesday, May 7, amid broad sell-off across sectors.

SESEX dropped more than 600 points while NIFTY traded below the 22,500 level. All the NIFTY sectoral indices were trading in the red except one sector. The NIFTY FMCG defied the negative trend in the broader market to mark its highest single-day gain in nearly two years.

The sectoral index tracking the leading FMCG firms gained as much as 2.85% in the intraday session. A majority of NIFTY FMCG constituents traded higher on Tuesday, with Marico taking the lead and soaring 10.5%.

With high volatility and current sell-off in the market, investors are on a hunt for defensive stocks, leading to an uptick in the NIFTY FMCG index.

What aided the rally in NIFTY FMCG stocks?

The rally in FMCG stocks could have been triggered by a defensive buying by the investors amid volatility.

The FMCG stocks are seen as a defensive segment as there is a constant demand for its products, regardless of the economic cycle. The demand for groceries, personal care items and packaged food, among others, appears to remain consistent irrespective of the market trend.

Further, market experts have witnessed a positive commentary around the FMCG sector, given a minor uptick in volumes, along with expectations of a rural recovery going forward.

Also read: FMCG industry clocks 6.5% growth in January-March, rural consumption beats urban

Shares of sectoral major Hindustan Unilever Ltd (HUL) gained as much as 5.52% on Tuesday to an intraday peak of ₹2,380.8 per piece, while Dabur jumped 7% in the session.

Analysts believe that the impact of multiple price cuts taken by FMCG companies over the last financial year 2024 in order to boost growth in volumes, will settle down in the first half of the current financial year 2025 for most of the commodity-sensitive categories.

Another FMCG major Britannia Industries witnessed a revival in its market share during the March quarter, led by the pricing action to remain competitive, along with increased investments in brands supported by distribution expansion.

The company’s executive vice chairman and managing director, Varun Berry stated in the earnings conference call that Britannia is expected to multiply its adjacent business revenues through route-to-market 2.0, which is set to take off in the second half of the ongoing financial year.