Indian consumer supplies expect tax

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It has been over a month since India presented their trade union budget, which offered a huge tax relief to increase Urban consumption. However, this movement did little to raise consumer reserves.

Nifty FMCG (rapidly moving consumer goods)-which intercepts 15 supplies Listed on the National Stock Exchange – it increased by over 3%, because the budget was presented on February 1. This rally came quickly.

The index fell in 18 of the 23 sessions after increasing the budget and dropped by almost 9% this year, compared to a 4.72% drop in the NIFTY 50 index.

It was expected that the shares would accumulate because investors took part in higher consumer expenses after tax reduction in April. However, investors had to limit their enthusiasm due to the coincidence of factors.

According to Kranthi Bathini, director of the Capital Strategy at Maeth Mills Securities, many consumers will probably collect higher income resulting from these tax reductions or spending money on goods from outside FMCG, such as engine vehicles.

“This is not a thing overnight in which FMCG shares will now increase with tax reductions and RBI rate reduction (Bank of Reserve India). Looking at the impact will take some time, “Bathini said.

Analysts have found that higher valuations also darken the cancellation of many FMCG shares.

Another reason for their worse results is the “fairly high level of penetration” of some personal and home products, said Prament Gubbi, co -founder of Marcellus Investment Managers. This means that companies have already gained a large market share, leaving little space for further development.

Source: NSE statistics

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

Companies such as Nestle India – with popular brands, such as Maggi, Nescafé and Kitkat under the umbrella – also attack consumers with higher disposable income, who can spend on premium products.

Data from the World Bank Shows that GDP per capita increased by 7.1% in 2023 from a year ago to USD 2,200.

Many companies were banking on “Premium wave. “

They expected consumers to look for better products because they became more wealthy, but sales did not meet expectations, Gubbi said CNBC in India.

He added that the development of companies directly to consumer also died revenues from FMCG companies with traditional sales channels.

Actions from February Itc – upper farm in Nifty FMCG with a weight of 30.7% – fell by 12.3% while Hindustan Unilever (20.2% weight) lost 11.4%. Other companies are best weighted, such as Dad consumer products AND Nestle India fell by 10.5% and 5.4%, respectively.

“Consumer reserves, such as Hindustan Unilever, Godrej Consumer Products and others, mainly put pressure on the margin due to poor demand – which was also visible in GDP numbers in the second quarter“Bathini said CNBC in India.

He added, however, that faster GDP growth in the third fiscal quarter can signal “some improvement” in the results of companies focused on consumers.

GDP data in India for the quarter of the end of December showed 6.9% of the year's year to year in private consumptionCompared to 5.9% three months earlier.

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

Thanks to the consumer trends, “at best uneven in all segments,” said Harsha Fop, investment director at Kotak Mahindra Asset Management, adding that FMCG shares “need a better increase in earnings and/or lower valuations for lasting results.”

“Without this, actions can be related to the range or in connection with the market movement,” said Fall at CNBC, India.

For example, the Hindustan Unilever trades in price to a profit of 48.5, compared to NIFTA 50 P/E indexes almost 20.

Gubbi Marcellus is positive on specific segments in the consumer space, and not in the sector as a whole, emphasizing food and drinks, as well as kitchen utensils-who is still growing, taking into account the lower entry and sales barriers on e-commerce platforms.

Perhaps a lesson for investors who want to find opportunities in the consumer sector in India are to be just as demanding in choosing inventory as in weekly food shopping.

India Minister of Trade and Industry Piyush Goyal visits Washington on Monday. The minister is expected Meet a representative of US trade Jamieson Greer and US Secretary of Trade Howard Lutnic to discuss the trade agreementAccording to the official. Goyal's visit takes place a few weeks before the entering of mutual tariffs from the USA, which means that Indian goods imported to the US will have to face high fees, which led to about $ 7 billion in annual losses for India.

The USA wants zero tariff for car import in India. As part of the potential trade agreement between Washington and New Delhi, Trump's administration presses the latter Remove your tariffs for car import. Reuters announced that India is reluctant to proceed to this request, although they are open to further reduction of fees, citing three sources familiar with this case. Removal of car tariffs in India – which are up to 110% – smoothes Tesla's entrance to the market. The company initiated Elon Musk is preparing to start selling electric vehicles in India.

India to remain crucial for the global supply chain. The nation of Southern Asia has the highest average tariffs for American goods, so this is not a surprise US President Donald Trump threatened to hit India with retaliation imports. However, India is becoming more and more important for diversification producers from China, which means Tariffs may not reduce the importance of New Delhi as a production centersaid Charles van der Steene, president of North America for Maersk.

The British startup of smartphones does not look like India. According to Ben Wood, the main analyst of CCS Insight, nothing that has launched a new phone device (3A) is headed for the Indian market. Last year, the company experienced 557% in India in India, creating Nothing fastest developing smartphone brand in 2024The founder of Carl Pei said in January. In addition, the company's co -founder, Akis Evangelidis, plans to move to India to go there this year.

Indian supplies show signs of reception, after Nifty 50 The index closed to 22 544.70, increasing slightly below 1% compared to the week earlier.
The 10-year profit of India government bonds from India slightly dropped to 6.687%.

On CNBC TV this week Michel Duekeris, general director of the world's largest Brewer AB inbev, said indie “One of the large growth markets in the future“The nation of Southern Asia is already the third largest global market for Budweiser in the case of” very young “and selling the population of India, which experiences increased purchasing power, there is a” huge opportunity “for Piwowar. However, obstacles, such as high alcohol regulations and taxes, which means that the road will not be completely liquid.

Meanwhile, SEEMA Fashion from CNBC has announced that investors are thinking about their exposure to emerging markets due to Trump's tariffs and paying attention to which countries, however, are the most and the least dependent on the USA India “Is still a scratch of the head.