Consumption stocks gained after Finance Minister Nirmala Sitharaman presented the interim budget for the year 2024. The Nifty FMCG index gained around one percent on February 1.
Godrej Consumer Products was a top gainer, up more than 9 percent after January 31's third quarterly results.
Shares of Dabur India were trading 5 percent higher on positive rural growth, while Marico was higher by 3 percent at Rs 544.3 per share.
Diversified conglomerate ITC was also higher by around 1 percent. FMCG major HUL clocked an intraday high of Rs 2,511.55 per share, higher by 1.2 percent on the NSE.
Also Read | Industrial stocks correct after Rs 11.11 lakh crore capex allocation in Budget 2024
In the Budget 2024 announcement, the FM shared the centre's plan to construct additional two crore houses in rural areas. "This will help in reviving rural economy and also give further impetus to infrastructure sector," said Vivek Mittal, Executive Director, Deloitte India.
The Finance Minister also announced other schemes to boost agri output of high yield crops, establishment of aqua parks aimed at improving rural incomes, and extension of Ayushman Bharat scheme.
Additionally, the FM hiked the capex outlay for 2024 to Rs 11.11 lakh crore. "This surge in investment will not only drive economic growth but also create increased employment opportunities, aiding rural India for higher consumption too," Sanjay Moorjani, Research Analyst at SAMCO Securities.
This year, consumption stocks have delivered more than 30 percent returns.
Bharti Airtel, ITC, Hindustan Unilever, Mahindra & Mahindra, Asian Paints, Titan Company, Maruti Suzuki, Nestle India, Bajaj Auto and Trent are the 10 biggest constituents, by weightage, of the Nifty India Consumption Index, according to a December 29 factsheet from the National Stock Exchange.
At an earlier interaction with Moneycontrol, Aamar Deo Singh, Senior VP- Research at Angel One, had cited the index's appreciation to illustrate how the consumption space generated good returns for investors.
“Major heavyweights delivered a strong performance, with the exception of HUL, Marico, etc.,” he said.
Consumption stocks were expected to regain favour after the budget announcements because of the stability they offer in a volatile market. The government was expected to realign focus on measures to stimulate consumer demand and spending, and rural development, which have been lagging urban markets' spending.
Also Read | Budget 2024: Railway stocks fall after budget announcement
India’s consumption story is in the need of a boost, say analysts. In a population of 1.4 billion, demand has been mostly spread across about 100 million people, Singh said.
“Two-wheeler sales, a key indicator of mass consumption, continues to remain below the pre-pandemic peak, indicating the overall struggle in increasing consumption across the population,” he said.
Analysts also told Moneycontrol that the long-term outlook for consumption theme appeared promising, with rising incomes, a young population and an expanding middle class.
There is optimism around discretionary stocks in the long-term, too, given how the nature of spending has changed. The consumption profile has steadily increased its allocation towards discretionary items as the country’s GDP rose.
As the GDP and the per-capita income grows, Barclays predicts there will be a stark shift towards more discretionary spending compared to necessary spending.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
