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FMCG & Retail wrap: Investors rejoice ITC stock surges 8%, retail sales in August recover to 88% pre-COVID levels

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Household products are getting expensive on the back of rising raw material prices. After HUL hiked prices of detergents and soaps, sources said Dabur has hiked the price of hair oils across brands by anywhere between 2.3-7.5% in the past 1-2 months.

FMCG & Retail wrap: Investors rejoice ITC stock surges 8%, retail sales in August recover to 88% pre-COVID levels
ITC was the talk of the D-town on Thursday after a surprise surge of nearly eight percent to hit a seven-month high. It was also the stock's biggest intraday move since May 2020.
The chatter around ITC's stock isn't new. But it has always been of investors just tired of waiting for it to break out of the narrow range it has been trading in for over a year, underperforming its peers.
No surprises then that Twitter was flooded with memes and rejoicing investors whose patience certainly seemed to have paid off. But what led to this sudden surge? Investors say there was no particular development in the company that could have triggered the rally. But some optimism around its cigarettes business improving on the back of offices resuming and more people stepping out, growth of its hotels business – including its new asset-right strategy -- as travel picks up, and of course, its aggressive growth plans for the FMCG business where the company is also actively eyeing inorganic opportunities could have been reasons behind the rally.
According to Abneesh Roy, Executive VP-Institutional Equities of Edelweiss Securities, some triggers could also have been that the Parliamentary panel's advice to take up FDI in tobacco, which could open up more opportunities for cigarette companies.
He told CNBC-TV18 that more gains are expected in the shares of ITC towards a target of Rs 241.
Hair oils get expensive
In other FMCG news, household products are continuing to get expensive on the back of rising raw material prices. After HUL hiked prices of detergents and soaps, sources told CNBC-TV18 that Dabur has hiked the price of hair oils across brands by anywhere between 2.3-7.5 percent in the past 1-2 months, with the steepest hike being seen in the 500ml pack of its Dabur Anmol Gold Coconut Hair oil of Rs 14 or 7.5 percent to Rs 199 from Rs 185 earlier.
The price hike, however, isn't a surprising move. Prices of crude oil and crude derivatives such as Light Liquid Paraffin (LLP), a key component in making hair oils have been rising along with a steep rise in packaging costs as well.
Dabur confirmed to CNBC-TV18 that it has undertaken calibrated weighted average price increases of mid-single-digit as it sees 'unprecedented commodity inflation across key raw material'.
What could also get expensive is aerated fruit beverages after the GST Council on Friday announced that "Carbonated fruit beverages of fruit drink" and "Carbonated beverages with fruit juice" will be subject to GST at 28 percent with an additional cess of 12 percent.
Currently, major companies that sell carbonated fruit drinks include Parle Agro with Appy Fizz, B Fizz, Frio; Coca Cola India, PepsiCo India, among others.
Retail sales recover
Recovery is in sight finally for the retail industry thanks to festive shopping picking up pace. Retail sales have come close to pre-covid levels in several parts of the country, especially in the north and south where retail sales have reached 98 and 97 percent respectively. However, with the West still lagging, overall retail sales in India in August recovered to 88 percent of pre-COVID levels of August 2019, Retailers Association of India (RAI) said.
Categories that have already exceeded 2019 levels are Quick Service Restaurants (QSR) and food & groceries, but RAI says that the overall industry sentiment will improve when the clothing and accessories category shows growth. Apparel sales are yet to catch up and were 12 percent down in August compared to 2019 levels.
But this recovery, along with the pace of vaccination and a pickup in footfalls in stores, is giving retailers hope that this festive season will bring back the much-needed recovery after almost two years of a dampener.
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