FMCG stocks are back in focus, with Abneesh Roy of Nuvama Institutional Equities flagging a constructive outlook for the sector, driven by pricing power, improving demand, and market share gains for leaders. Roy names Marico, Nestle India, and Asian Paints as his top picks, while also highlighting recovery potential in Hindustan Unilever.
The sector appears to have entered the March quarter on a strong footing, aided by a favourable base. Roy expects robust Q4 earnings, particularly for Nestle India, while volume recovery trends seen in the December quarter are likely to sustain for HUL and Asian Paints.
For Asian Paints, Nuvama is building in around 9% volume growth, with potential upside given the company's aggressive stance in the market. HUL, which reported a multi-quarter high in volumes in Q3, is also expected to maintain momentum. Early earnings prints from peers have already been encouraging, reinforcing expectations of a solid quarter across FMCG names. This comes as the stock has seen quite a meaningful correction in recent times. The stock has fallen over 9.5% this year.
Pricing Power Boosting Outlook
A key driver behind the renewed optimism is the return of pricing growth. In the paints segment, Asian Paints has already undertaken two rounds of price hikes, cumulatively in the double digits, signalling strong pricing power.
ALSO READ: 'Buy The Unpopular': Raamdeo Agrawal's Five Mantras Include An Ignored Sector To Watch
Roy notes that such moves not only help offset input cost pressures but also strengthen the competitive positioning of market leaders. Smaller and regional players, constrained by weaker balance sheets, are likely to cut back on advertising and promotions—creating room for larger companies to gain share. This dynamic is expected to play out across FMCG categories, supporting margin recovery over the medium term.
Crude Volatility a Key Monitor
Despite the positive outlook, crude oil remains a critical variable. Higher crude and palm oil prices can pressure margins, particularly for companies like HUL and Godrej Consumer Products, which have significant exposure to input costs. Roy cautions that while near-term margin pressure may persist—especially into Q1—the market has largely priced in these risks following recent stock corrections.
Looking beyond near-term volatility, Nuvama remains positive on the FMCG sector into FY27, citing a combination of pricing growth, operating leverage, and market share consolidation. Roy also highlights Tata Consumer Products as another key name to watch, alongside crude-sensitive plays like HUL and Godrej Consumer if input costs ease.
ALSO READ: To Invest Or Not To Invest: Raamdeo Agrawal Weighs In On IT Sector Amidst AI Disruption
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
