Indian consumption stocks expect a tax cut increase

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It has been more than a month since India presented its Budget of the Union, which offered a massive tax relief aimed at increasing Urban consumption. The measure, however, has done little to lift consumers’ actions.

The FMCG index (rapid movement consumer goods), which Capture 15 actions List in the National Stock Exchange of India, it increased more than 3% as the budget presented on February 1. However, this manifestation faded quickly.

The index has decreased by 18 of the 23 sessions after the impulse of the budget and has dropped almost 9% so far this year, compared to the 4.72% drop in the NIFTY 50 index.

The expectation was that the shares joined as investors were considered in a higher consumer expense once the tax cuts enter into force in April. However, investors have had to stop their enthusiasm due to confluence of factors.

It is likely that many consumers embolize the greatest available income that results from these tax cuts, or spend money on goods that are not FMCG, such as motor vehicles, according to Kranthi Bathini, director of Equity Strategy for Wealthmills Securities.

“It is not something during the night, where FMCG shares will now increase with tax cuts and RBI rates cut (Bank of the Indian Reserve). It will take some time to see the impact, “Bathini said.

The highest valuations have also mitigated the appeal of many FMCG actions, analysts said.

Another reason for its low performance is the “reasonably high penetration level” of certain personal and home care products, said Premod Gubbi, co -founder of Marcelus’s investment administrators. This implies that companies have already captured considerable market share, leaving little space for greater growth.

Source: NSE Statistics

“Indian FMCG companies have had an anemic volume growth even before the recent slowdown in consumption established in the quarter from July to September,” Gubbi added.

Companies like Nestle India, with popular brands such as Maggi, Nescafé and Kitkat under their umbrella, have also been attacking consumers with higher disposable income that can spend on premium products.

World Bank data It shows that India’s GDP per capita grew 7.1% in 2023 for a year to $ 2,200.

Many companies were depositing a “Premiumization wave“

They expected consumers to seek better products as they became richer, but sales have not met expectations, Gubbi told India Inside.

The growth of consumer direct companies has also eliminated the income of consumer goods companies with traditional sales channels, he added.

Since February, actions in ITC – Superior possession in the NIFTY FMCG index with 30.7% of weight – has decreased 12.3%, while Hindustan Unilever (20.2% of weight) has lost 11.4%. Other companies from the best companies such as Tata Consumer Products and Nestlle India They have decreased 10.5% and 5.4%, respectively.

“The actions of consumers such as Hindustan Unilever, Godrej Consumer Products and others faced some type of margin pressure due to the weak demand, which was also seen in the Second quarter GDP numbers“Bathini told CNBC Inside India.

However, he added that the fastest growth in the GDP of the third fiscal quarter could indicate “some kind of improvement” in the results of consumer -centered companies.

India’s GDP data for the final quarter of December showed a 6.9% year -on -year growth in private consumptioncompared to 5.9% three months before.

The question for investors is whether they should bet on the FMCG sector, or look elsewhere.

With the consumer trends “still irregular in the best case in all segments,” said Harsha Upadhyaya, director of investments of Kotak Mahindra Asset Management, and added that FMCG actions “would need better growth and/or lower assessments for sustained performance.”

“Without this, the actions can be in rank or in line with the movement of the market,” Upadhyaya told India Inside.

For example, Hindustan Unilever is quoted at a price/profits ratio of 48.5, compared to the NIFTY 50 P/E index of almost 20.

Marcellus’s gubbi is positive in specific segments within the consumer space, instead of the sector as a whole, highlighting food and drinks, as well as kitchen utensils, which are still growing, given lower barriers to entry and sales on electronic commerce platforms.

Perhaps, the lesson for investors seeking to find bargains in the Indian consumption sector is to be as demanding in their shares of shares as in their weekly purchases.

India’s Minister of Commerce and Industry, Piyush Goyal, visit Washington on Monday. The minister is expected Meet the United States trade representative Jamieson Greer and United States Secretary Howard Lutnic to discuss a commercial agreementAccording to an official. Goyal’s visit occurs only a few weeks before the reciprocal tariffs of the USA.

The United States wants zero tariffs on car imports in India. As part of a possible commercial agreement between Washington and New Delhi, the Trump administration is pressing the latter for Eliminate your tariffs in car imports. However, India is reluctant to access that request, although it is open to further reduce the encumbrances, Reuters reported, citing three sources familiar with the matter. Eliminate automotive rates in India, which are as high as 110%, will soften the entrance of Tesla into the market. The company based on Elon Musk is preparing to start selling its electric vehicles in India.

India will remain crucial for the global supply chain. The nation of southern Asia has the highest average tariffs on US goods, so it is so surprising than The president of the United States, Donald Trump, has threatened to slap India with retaliation import levies. However, India is becoming increasingly important for manufacturers who diversify from China, which means Tariffs may not reduce the importance of New Delhi as a production concentratorCharles Van der Steene, president of North America of Maersk said.

The British Startup smartphones nothing seems like India. Nothing, which launched its new Phone (3rd) device on Tuesday, is directed to the Indian market, according to Ben Wood, head analyst of the CCS Insight market firm. The company experienced a growth of 557% year after year in India last year, making Nothing from the fastest growing smartphone brand in 2024Founder Carl Pei said in January. In addition, the co -founder of the company, Akis Evangelidis, plans to move to India to direct the operations there at the end of this year.

Indian actions show signs of a collection, after Ingenious 50 The index closed to 22,544.70, increasing just under 1% from the previous week.
The 10 -year -old Indian government bonds was reduced slightly 6,687%.

In CNBC TV this week, Michel Doukeris, CEO of the world’s largest brewery, AB Inbev, said India is “One of the great markets for growth in the future“The nation of southern Asia is already the third largest global market for Budweiser, and with the” very young “population and urbanizing India that is experiencing an increase in purchasing power, there is a” massive opportunity “for the brewer. However, obstacles such as high regulation and taxes in alcohol mean that the road is completely coming the soft navigation.

Meanwhile, CNBC’s Sema Modly reported that investors are rethinking their exposure to emerging markets due to Trump’s tariffs, and they have no note of which countries depend more and less on India in the United States, however. “It is still a head scratch“The results of the efforts of the Indian Prime Minister Narendra Modi to negotiate an agreement with Trump are still uncertain, weighing on Indian actions. In addition, the actions of the country are overvalued compared to that of China, even after the manifestation of the latter in technological actions last week, an analyst said.