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Not the worst slowdown for FMCG sector, expect festive boost, says Nielsen

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FMCG stocks have been in focus. A Credit Suisse report suggest that the FMCG sector is witnessing the worst slowdown in the past 15 years. However, ahead of the GST meet this Friday, we learn from sources that the fitment committee has formally rejected the rate cut proposal for biscuits. 

FMCG stocks have been in focus. A Credit Suisse report suggest that the FMCG sector is witnessing the worst slowdown in the past 15 years. However, ahead of the GST meet this Friday, we learn from sources that the fitment committee has formally rejected the rate cut proposal for biscuits.
Prasun Basu, President-South Asia, Nielsen told CNBC-TV18 that the sector has been seeing a continuous slowdown right from the start of the year and that it has continued in July-September quarter too.
“We had good double-digit growth... it slowed down to around 10 percent growth last quarter and we had forecasted a 7-8 percent growth for this quarter and I think we are going to keep the same forecast that we had made a couple of months back,” he said.
However, he does not agree that it is the worst slowdown in 15 years. “I would not want to down play the slowdown, this is clearly a slowdown and it has come to a fairly low number but definitely not the worst slowdown. We had slowdown in 2014, in 2016 and both were difficult years,” he said. He added that in 2016 the sector saw the lowest point in last 5-10 years which was around 4-5 percent.
The sector is pinning its hopes on the festive season. "October has a bunch of festive events coming and I expect things to pick up in the October-December quarter." he explained.
“We feel beyond the festive season as we get to the end of the year, we should see consumers strengthening their demand and start coming back and hopefully the manufacturers would have bit more bullishness to push through innovation. If trade and distribution increases, we should see us starting to get back to a better phase,” said Basu in an interview with CNBC-TV18.
When asked about the rural versus urban trends, he said rural has been trending a much steeper downtrend. “The trajectory is much-much sharper in rural. For example from Q3 of 2018 to Q2 (April-June quarter) of 2019, we went down from 20 percent to 10 percent in rural that is halving of growth. In urban, we went from 14 percent to 10 percent,” he said.
"Currently that is the September quarter rural has seen further slowdown but interestingly the urban market is starting to hold up a bit," said Basu.
According to him, plastic ban is unlikely to impact financials of the companies more than a few basis points.

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CompanyPriceChange%Gain
Tata Steel1,158.35 43.90
Coal India162.65 6.15
JSW Steel731.20 25.40
Dr Reddys Labs5,453.00 160.95
Hindalco393.15 7.75
CompanyPriceChange%Gain
Dr Reddys Labs5,451.20 160.55
Power Grid Corp246.30 4.75
TCS3,271.70 55.65
Infosys1,446.75 22.20
HCL Tech983.45 14.95

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