As most sectoral indices and the broader markets languished in a sea of red, the consumer staples sector outperformed with the Nifty FMCG rising over a percent.
The top gainers on the index were FMCG giants such Nestle India, Hindustan Unilever, Tata Consumer and Dabur India, surging up to 4 percent. On the other hand, ITC, Varun Beverages, United Spirits and Radico Khaitan recorded losses in trade.
Analysts are turning bullish on the consumer sector once again, as seen by the Nifty FMCG index rising 24 percent over the past six months. In comparison, the Nifty 50 index has gained around 16.5 percent during the same time period.
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As the Federal Reserve slashes its benchmark lending rate by 50 basis points, analysts suggested it is a positive for Indian equities as foreign flows will invest more money in emerging markets, especially Indian equities. The RBI is soon expected to follow in the Federal Reserve's footsteps, cutting rates.
However, there are certain recessionary fears with some participants believing that the American central bank took such a drastic step - cutting rates by 50 basis points, instead of the largely expected 25 basis points - because USA could be veering towards the recession territory.
Therefore, along IT and pharma which are considered defensive sectors, consumption has a theme has also garnered favour.
Another key reason for the bullishness on consumption comes from the populist budget, which had a high focus on the recovery in the rural sector. The finance minister announced measures to spur employment, a key pain point of the lower- and middle-class. Additionally, with the measures to boost agricultural income coupled with the predications of a normal monsoon, rural demand might see a turn-around.
These initiatives are likely to boost disposable income, therefore increasing demand for consumer staples and products.
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