The Hindu Business Line : FMCG stocks gain

Some of the FMCG stocks reacted positively in expectation of increased spending power, unleashed by the Budget proposals, in the hands of a large number of people getting translated into higher sales and profit figures for the companies.

Spending power

Increase in income tax exemption limits, greater spending on agriculture, health and education and the waiver of farm loans, may lead to overall income surplus and more purchasing power, according to analysts. Even if a part of that goes into FMCG items, it is likely to buoy up the demand, they felt.

Packaging cost cut

The excise cut for packaging materials is also seen as a positive for certain food processing players in the FMCG pack, said Mr Ram Patnaik, sector analyst at Religare. The Budget has proposed reduction in excise for packaging for food-processors by half to 8 per cent. Hindustan Unilever, ITC, Britannia, Dabur and United Breweries should benefit in varying degrees from this move.

Customs duty abolition on bactofuges from 7.5 per cent now is reckoned as a positive for the dairy players likely Nestle.

Negatives

The steep hike in non-filtered cigarettes for different lengths could impact cigarette sales, if it is passed on to the price sensitive consumers of non-filtered varieties. The excise duty for less than 60 mm length has been raised to Rs 819 per 1,000 sticks from Rs 168 per 1,000 sticks currently. For the 60 mm to 70 mm category, the excise duty has gone up to Rs 1,323 per 1,000, up from Rs 546 per 1,000.

The aggregate impact of all these indirect proposals lent a flat outlook for the sector and this was evident in the movement of the BSE FMGC Index, which showed more or less a horizontal trend and finished up around 1 per cent.

But Hindustan Unilever was a clear gainer, which ended the session up 3.27 per cent. Among the other 11 components of the index, Godrej Consumer finished 1.77 per cent up. United Sprit and United Breweries reacted differently even though the Budget did not impose additional indirect tax burden on the IMFL. While the former moved up 1.46 per cent, the later declined by 0.41 per cent.

ITC barely finished in the green and Dabur India closed up 1.32 per cent. Though the tea plantation sector has received some boost, Tata Tea, largely a marketing company now, managed to finish flat. Britannia was among the losers, down around 2 per cent. Nestle also finished in the red.

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