Shares of fast moving consumer goods (FMCG) players witnessed a strong selloff on December 9 after a weak quarterly update from industry major Godrej Consumer sparked concerns of an industry-wide demand slowdown.
Industry bellwether Hindustan Unilever recorded its worst fall in six weeks as it plunged 4 percent, followed by Dabur, Marico and Tata Consumer Products, Britannia and Colgate--that were down 2-4 percent. However, it was Godrej Consumer Products that saw the steepest decline as it dived over 9 percent following its quarterly update.
The sharp losses across most constituents also weighed heavily on the Nifty FMCG index, dragging it down over 2 percent. Nifty FMCG was also the worst performing sectoral index today.
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Godrej Consumer Products surprised the Street by releasing its quarterly sales updates well before the quarter came to an end. Regardless, the consumer goods major stated witnessing 'subdued' demand conditions in the economy in the past few months. "The demand conditions in India have been subdued for the past few months which is evident in FMCG market growth," the company said. Adding to the pessimism, GCPL further added that these It also said that these negative trends were likely to persist for a few months.
This reignited concerns of persistent demand slowdown, dragging sentiment for the entire FMCG pack. These concerns were also pointed out by several FMCG companies in their Q2 earnings calls.
A slowdown in urban consumption, moderating economic growth and low real wage hikes have adversely affected volume growth for FMCG companies while also putting pressure on operating margins.
Taher Badshah, Chief Investment Officer, Invesco Mutual Fund believes that FMCG was still at a tough spot with increased competition from regional players and cyclical factors. On that account, Badshah, in an exclusive interaction with CNBC-TV18 stated being invested in the FMCG space, as he currently chooses to rather look into some consumer discretionary names.
Also Read | Godrej Consumer shares tank 9% after firm flags Q3 margin, volume growth warning
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