For instance, the HUL stock has gained 6.5% in the past year as against the 27% gains posted by the Nifty 50 index.
By contrast, the Tata Consumer Products stock has gained 41% in the past year — significantly outperforming the benchmark index.
Nifty’s sectoral index, the Nifty FMCG in dex, has gained 19.4% over the past year — underperforming the Nifty 50 index. It is trading 1.6% below its record high level.
ETMarkets.comSubdued consumer demand, input cost inflation and increased competition have ensured that the overall performance of most FMCG companies has remained lacklustre.
Consequently, despite their gains, these FMCG stocks are still trading much below their peak PE valuations (as shown in the chart). For instance, HUL is trading at a PE of 61.7 while its peak PE has been 79.5 (hit in September 2021). ITC is trading at a PE of 30.7, even as its peak PE stands at 45.8 (hit in May 2013). FMCG companies are reporting an uptick in rural demand for the quarter ended June this year. A good monsoon and a resurgence in rural demand augurs well for consumer goods companies. If commodity prices remain benign in the short term, it will further help the companies improve their profitability.
This will also ensure that interest in these defensive stocks continues to remain high even when the stock markets correct from the current record-high levels.
