FMCG's October Jinx: Can Festive Demand, GST Reset Turn The Tide?

The Nifty FMCG index has fallen every October since 2020. Over the last 10 years, it managed gains in the month only three times, according to data compiled by NDTV Profit from Bloomberg.

In 2025 so far, the index has lagged the broader NSE Nifty 50, slipping 3.7% while the benchmark rose 4.1%. The sharpest declines came from Varun Beverages Ltd., which declined 30.5%. That was followed by United Spirits Ltd., Colgate-Palmolive (India) Ltd. and ITC Ltd., which fell 18.5%, 17.1% and 12.2%, respectively.

Valuation Concerns Linger

Despite weak returns, valuations remain stretched. The FMCG index trades at 31.41 times earnings compared with 21.84 times for the Nifty 50, according to Bloomberg data. Within the basket, only Emami Ltd. and ITC Ltd. trade below the index multiple.

The pressure on the sector stems from slowing urban demand. Persistently high inflation has led consumers to cut back, shift to smaller packs or buy cheaper brands. While rural demand has stayed firm, urban households face rising living costs and fewer job opportunities.

Tax Change Lift

The GST Council has approved a major reset in indirect taxes that could affect daily-use products. The four-slab system of 5%, 12%, 18% and 28% is replaced by two rates—5% and 18%. A 40% rate will apply to luxury vehicles, tobacco and other sin goods.

Lower GST is expected to ease costs in sectors including FMCG, autos, banks, NBFCs, cement, consumer goods, durables, hotels, insurance, logistics, quick commerce and footwear.

Festive Tailwinds

Consumer companies may have seen a shift in growth in the latter half of the second quarter compared with the first half, Morgan Stanley said in a note on Oct. 1. It flagged that FMCG firms faced a bigger hit than retailers and discretionary players.

The brokerage highlighted three factors not yet reflected in forecasts: a possible demand boost after the GST changes for retail and discretionary businesses, subdued commentary from FMCG companies in household and food categories, and intensifying competition in the paints industry.

While it expects incremental growth trends to persist in the September quarter, Morgan Stanley said early festive demand could tilt the balance in favour of urban consumption. It added that the third quarter could mark the strongest festive season in five years.

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