Home / Markets / Stock Markets /  What made Nifty FMCG the best performed sector post budget announcement?

After the Budget release, the domestic stock market ended today on a mixed note. At closing, the Nifty was down 45.85 points or 0.26 per cent at 17,616.30, while the Sensex was up 158.18 points or 0.27 per cent at 59,708.08. The market took off after the announcements, with the Nifty moving closer to 18,000 and touching an intraday high of 17,972.20 and the Sensex topping 60,000 and touching a level of 60,773.44 on the intraday chart. In today's closing session, Nifty FMCG was the best-performed sector, up by 1.13%, whereas, the worst sector was Nifty PSU Bank, down by 5.68%. The rally in the Nifty FMCG index came after the government enhanced capital expenditure outlay by 33% to 10 Lakh Crore.

Mr. Amarnath Halember, Executive Director and CEO, NextG Apex India Pvt Ltd, said “The overall budget is quite satisfactory for the FMCG sector. The government has enhanced capital expenditure outlay by 33% to 10 Lakh Crore thereby increasing the opportunities for investments and on the other hand increasing the will of middle class people to spend on the FMCG sector. This is a win-win situation for people as well as the sellers, manufacturers and distributors as well. Increasing the capital expenditure means increasing many factors that somehow lead to enhancing the overall expenditure of the sector. It is a smooth road ahead. The Union Finance Minister spoke about having significant actions been made for the tech-driven economy."

Parminder Varma, Chief Business Officer, Sharekhan by BNP Paribas said “The Union Budget has been largely in line with market expectations. Despite the important state elections this year and the general election next year, the government preferred to focus on supporting a sustainable healthy growth momentum in the economy rather than turn populist keeping the upcoming elections in mind. From investor’s point of view, the Union Budget has further reinforced our conviction on the three investment themes of Capex, Credit & Consumption. Capex is high on the policy agenda this year also. The Budget proposed a 33% increase in capital expenditure allocation to Rs10 trillion along with interest free loans to tune of Rs1.3 lakh crore to state governments for infrastructure development. In fact, the capital expenditure allocation has surged to 28.6% of revenue expenditure in FY2024 – more than doubling from 14% in FY2018 and highlights the improving trend in the quality of expenditure under the second term of this regime. The non-food banking credit growth stands at a healthy double-digit level for many months now. In this Union Budget, the impetus given to the manufacturing sector especially MSME, renewable energy and farm sector is expected to support a sustained growth in the banking credit for the next few years. Banks have cleaned up their balance sheets and are well capitalised to maintain a healthy growth in core business."

“Last but not the least, the government has given some relief to the middle class to boost consumption especially since the inflationary pressures are easing out and the pent up consumer demand could fizzle out in FY2024. The recent volatility also offers an opportunity to invest in consumer facing stocks at more reasonable valuation.

In line with the three investment themes, our preferred picks are ITC, HDFC Bank, SBI, M&M, L&T, Bharti Airtel among large caps while in the midcap/smallcap we like Cummins, Trent, Indian Hotels, Finolex Cables, Dalmia Cement, GNA Axles.

Though the Union Budget has more hits than misses, the celebrations have been overshadowed by the turbulence in Adani group companies. Past experience shows that such issues can dampen the spirits for a short period of time but eventually the market stabilize and the fundamentals come to fore. In the hindsight, the event driven volatility in market has turned out to be an opportunity for investors," said Parminder Varma.

Mr. Manish Aggarwal, Director, Bikano, Bikanervala Foods Pvt Ltd said “With inclusive development, reaching the last mile and infrastructure and investment featuring among the top priorities of this budget, there is no doubt that the budget has given all the right indications which would revive demand and promote consumption within the economy. This in turn is likely to give a boost to the FMCG sector including the food FMCG segment. While keeping macro-economic stability in mind, the huge push on infrastructure with a capex allocation of 10 Lakh crore including the food grain segment and the provision for decentralized storage capacity for farmers would not only spur the rural economy but also the broader economy. The government’s intent to make India global hub for millet or Shree Anna would also boost the food FMCG players increasingly focused on millet-based offerings. The increasing of income tax rebate limit and reduction of processing period for income tax would also catalyse greater spend and consumption in the economy. However, now that we still await the fine print of the budget, perhaps the budget should have made some explicit announcement on reducing prices for input items used in the FMCG sector as well as on packaging materials." said Mr. Manish Aggarwal, Director, Bikano, Bikanervala Foods Pvt Ltd."

Mr Manas Madhu, Co Founder, Beyond Snack said “In terms of personal income tax, it is encouraging to see that the rebate limit has now been increased in the new regime from 5 lakh to 7 lakh. This will increase disposable income levels and stimulate the FMCG industry's demand cycle. Furthermore, despite the epidemic, India has risen to become the world's third largest ecosystem for start-ups, and ranks second in innovation quality among middle-income countries, according to the Budget 2023. This will encourage businesses in the FMCG industry to develop distinctive offerings for the Indian market. In 2023, our growth-driving strategy will focus on innovation, prioritisation of profitable sales channels, and careful management of stock-keeping units. In addition, I am glad to see a budget that prioritises agritech and agriculture. The Agriculture Accelerator Fund and digital public infrastructure for agriculture will aid farmers and agritech startups looking for modern technologies, farm inputs, and loans. Furthermore, the Finance Minister's decision to establish a decentralised storage capacity for farmers will assist them in pricing their produce at competitive prices so that it may be sold at appropriate times."

Adani Enterprises, Adani Ports, HDFC Life, SBI Life Insurance, and Bajaj Finserv were among the top losers on the Nifty, while ITC, ICICI Bank, JSW Steel, Tata Steel, and Tata Consumer Products were among the top gainers. Sector-wise, the Nifty PSU Bank index fell by 5.68 percent, the Metal index fell by 4.5 percent, and the Infrastructure and Energy indices each fell by 1 percent. 

Vipul Das
Vipul Das is a Digital Business Content Producer at Livemint. He previously worked for Goodreturns.in (OneIndia News) and has over 5 years of expertise in the finance and business sector. Stocks, mutual funds, personal finance, tax, and banking are among his specialties, and he is a professional in industry research and business reporting. He received his bachelor's degree from Dr. CV Raman University and also have completed Diploma in Journalism and Mass Communication (DJMC).
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