DEMONITISATION AFTER EFFECT: FMCG SECTOR

Nifty’s FMCG (fast moving consumer goods) index has corrected by more than 8 per cent since the demonetisation move announced by the Government of India. FMCG which usually constitutes basic supplies for the public has been impacted negatively.

FMCG has been at the receiving end of this clean up drive initiated by the government. Though the value of products supplied by key FMCG companies differ from a single rupee to thousands but the real impact has been felt by most of them as people are only buying essentials which are of daily use and curtailing down on any other spends of high value which are discretionary in nature.

For the third quarter this would reflect on sales figure of the companies as FMCG players would see a fall in sales led by volume.

Margins and profits will also be dented as higher value product offering helps company in augmenting margins whereas low value product contribute low on margins.

Factoring the above impacts plus if it continues in short-term future too all the major FMCG players will be impacted negatively. Anticipating this the index has been on a slide since the move was announced.

Major losers: -

ITC- 9 %

Dabur- 7 %

Marico- 6 %

HUL- 5 %

Colgate- Palmolive- 5 %