FMCG stocks have disappointed. Can the big 4 pull off a turnaround?

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Subscribe to enjoy similar stories. Once considered a safe haven in times of economic turmoil, India’s fast-moving consumer goods (FMCG) sector now finds itself at a crossroads, grappling with rising competition, shifting consumer preferences, and an inflationary squeeze that threatens its stronghold on household essentials. Investors have historically seen it as a defensive sector, a bastion of stability, even during a market correction when it historically holds firm.

The FMCG sector has long been seen as a barometer of consumer sentiment in India, catering to consumers across income levels with essential products that remain in demand regardless of economic conditions. However, recent years have painted a different picture, with the sector falling short of expectations. Despite a broader market uptrend, the FMCG sector has not only underperformed but has also seen sharper corrections.

The Nifty FMCG index has delivered a modest return of just 1.8% this year, significantly trailing Nifty’s robust 11.7% growth. Moreover, in the last three months, the FMCG index has declined by 7.8%, compared to Nifty’s 2.9% drop. Individual company performance has been even more disheartening.

Industry leaders like Hindustan Unilever (HUL), Dabur, and ITC have grappled with stagnant sales, shrinking volumes, and declining profit margins, further weighing on the sector. Adding to these challenges is mounting competition from regional players and digital-first brands, which continue to erode market share. The pressing question now is whether this decline marks the beginning of the end for the FMCG sector’s status as a reliable safe haven or simply a temporary setback poised for recovery.