FMCG sector: HUL hints at lower volume growth

FMCG stocks on Friday showed a negative trend despite benchmark index touching fresh highs for the year 2019. The sector took cues from HUL which hinted on lower volumes growth for the fourth quarter of FY19.

Though, some major products of this sector such as detergents, toilet soaps, dishwashing bars, hair oils, shampoos and personal care witnessed rural growth at a good pace over the last few quarters. Owing to the election period, we feel that there might be some pressure on volumes. Moderation in growth is visible in rural as well as urban segments. The rural segment has grown at 1.3 times that of urban in the current fiscal, so far attributing the slowdown to a weak macro environment.

The effects of measures in the interim budget to boost consumption will take time to show up. The ratio of rural to urban growth is expected to fall to 1.2 in the fourth quarter. Competitive intensity has stabilised the impact of additional marketing spends such as promotions carried out during the Kumbh Mela, was little.

Nifty FMCG closed on Friday at 29953.40, down by 1.69 per cent. Major constituents of the index such as ITC, HUL ended the trading session down by 1.52 per cent and 2.23 per cent, respectively.