Thread by @FinterestC

#Didyouknow
What moves FMCG sector?
FMCG sector in India is available in 2 indices- NSE FMCG and BSE FMCG.
Let us look at the triggers which affect stock prices

1a)Volume growth
Revenue growth driven by volume growth shows demand for the products offered by the company. This impacts the stock prices in a positive way. Such an upsurge in the demand will play a vital role in moving up the price of the stocks of Indian FMCG companies.

1b)As rural India is less penetrated, the rising disposable income of the rural population gives an opportunity to the FMCG sector to grow. More growth opportunities reflects higher potential for revenue growth of the company and thus proves to be attractive for the investors.

2)Organic growth
Whenever a company takes measures and initiatives to grow, expand and diversify its operations using its own reserves and surplus for CAPEX, it leads to organic growth. Such a situation favors an up move in the stock prices.

3)Inorganic growth
Inorganic growth of a company arises out of mergers & acquisitions and takeovers. When good, productive and efficient companies are merged and taken over, the revenue generation and profit making capacity of the business is expected to improve.

4)Demergers
The FMCG sector covers a number of segments under itself like F&B, personal care and healthcare. As per the concept that the sum of parts is greater than the whole, if these segments are demerged, the valuations of individual segments are expected to be much higher.

5a)Raw materials
The prices of raw materials can increase due to higher currency exchange rates. This generally tends to lower the profit margins of the company. Hence, stock prices are expected to decline.

5b)However, if the companies are able to meet its input costs from the end-users or the consumers, it would not affect the company much.

6)Government Initiatives
Production-Linked Incentive (PLI) scheme taken by the union government gives FMCG companies an opportunity to boost exports. Higher exports would require higher production, and ultimately to higher sales, thus favoring the increase in the stock prices.

7)Inflation
The rise in prices tends to increase the company’s revenue, given that volume does not start declining. A certain degree of inflation is essential for the growth of the economy and the sector. Such situations help in increasing the price of stocks.

Are you ready to invest or take trades in this sector?

Follow @FinterestC more sectoral and company analysis research.