Commodity Online
MUMBAI: The Indian FMCG sector was found to be steadily sliding down over past few weeks as the global consumer staple stocks witnessed a fall since February.

With a total market size of more than USD 13 billion, the Indian FMCG sector is the fourth largest sector in the economy. Availability of key raw materials, cheaper labour costs and presence across the entire value chain gives India an edge above over its neighboring countries.



However, the current scenario was not found to be so rosy, as the companies were found to be caught in the turbulences of current global financial slowdown. The best defensive consumer staple sector in India has followed the trend of its global counterparts taking a plunge over past few weeks.

In the international markets P&G fell by close to 17%, Diageo over 19%, ITC over 16%, and Colgate fell by over 14% on the US bourses, while European majors like McBride and Croda fell by 8.3% ad 16.8% respectively.

The Indian consumer stable sector mirrored the global trend with a lag of 15 days. Indian FMCG majors like Hindustan Uniliver Ltd (HUL), and ITC Ltd witnessed a downfall in their stock prices. HUL fell by more than 15%, ITC, more than 10% and Asian Paints Ltd witnessed a fall of 11.8% after 16th February 2009.

However, the stocks closed with a mixed reaction on the Bombay Stock Exchange (BSE) on Friday. HUL rose by over 1% to Rs.233, ITC Ltd fell marginally by 0.2% to Rs.169.50, while APL fell by 0.5% to Rs.746.10.

Another major, Godrej Consumer Products Ltd (GCPL) had fell by over 1.5% to Rs.119 on Friday. The stock had shed by over 8% since 30th January, 2009.

However, experts keep a positive stance on the consumer staple sector in India. According to a report by Emkay Research, the sector is expected to report robust earnings growth in next 2 quarters.

In absence of incremental actions or news flow, there does not seem to have any obstacle to the earnings performance for next 2 quarters.

However, pricing actions and volume indications would remain key reference points for the sector.

According to experts, it was very unlikely that sector would witness de-rating in next 2 quarters despite any unexpected change in earnings momentum.

The Indian FMCG market was expected to treble from USD 11.6 billion in 2003 to USD 33.4 billion in 2015. As there was untapped market potential in the product categories like jams, toothpaste, skin care, hair wash etc, which has low per capita consumption.

Increasing population, particularly the middle class and the rural segments in India gives an opportunity to the makers of such branded products to convert consumers into successful business proposition.

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