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    Nifty FMCG falls 5% in one month, Nirmal Bang expects no visible signs of uptick before FY20

    Nifty FMCG falls 5% in one month, Nirmal Bang expects no visible signs of uptick before FY20

    Nifty FMCG falls 5% in one month, Nirmal Bang expects no visible signs of uptick before FY20
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    By Mousumi Paul   IST (Updated)

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    Nifty FMCG has declined nearly 5 percent since the beginning of November while in comparison the Nifty50 index has risen 1.52 percent.

    The consumption sector is the crux of any economy but high valuations, slow demand, liquidity pressures and moderation in volume growth are not good signs for the long-term. Indian FMCG sector has been seeing the worst year so far as along with all the above reasons, the sector also went through erratic monsoons this year that has led to an increase in pressure on the companies.
    The sector is again facing a rough patch since the beginning of November. Nifty FMCG has declined nearly 5 percent till now while in comparison the Nifty50 index has risen 1.52 percent during the same time frame.
    Most companies from the sector this quarter reported a dip in volume growth. Dabur’s volume growth slipped to 8.1 percent from 21 percent sequentially. Meanwhile, GlaxoSmithKline Consumer and Hindustan Unilever’s slipped 2 percent each this quarter. The reason behind the dip in consumption slowdown in the rural market, liquidity crunch, and erratic monsoons.
    With the subsequent de-growth in the consumption cycle, Nirmal Bang predicts that the slowdown will persist till the end of FY20 with no visible signs of an uptick.
    In its report, the brokerage said, “The majority of the coverage consumer companies have delivered mid-single to high-single-digit growth in H1FY20, with growth in the premium segment higher than the mass market segment. While almost all the companies were able to hold on to growth during the last reported quarter (2QFY20), there were no real signs of demand improvement.”
    It further added that full-year growth for FY20 is now going to be in mid-to-high single digits, with an expectation of a better second half compared to the first half. Nielsen had earlier revised its outlook for the sector to 9-10 percent growth for 2019 revised down from 11-12 percent.
    Despite the de-growth in the sector, the brokerage continues to remain positive on a long-term perspective and remains bullish on stocks that play on the premiumization theme.
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