FMCG stocks: Steady monsoon, social welfare thrust likely to aid growth, says Anand Rathi; lists top picks

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Also Read: Marico share price up over 31% in less than 3 months. Good time to buy?The brokerage noted that the results of the 2024 general election, particularly the loss of seats in key states like UP and Maharashtra, could prompt the Union government to intensify its focus on social welfare.With upcoming state elections in Maharashtra and Bihar in 2024 and the Budget likely scheduled for July, the brokerage anticipates increased allocation for social welfare schemes, which would boost rural income.The India Meteorological Department (IMD) forecasts above-average monsoon rains at 106% of the long-term average this year.

Also Read: Brokerages see likely gain in FMCG stock with BJP’s return to powerThe monsoon arrived early in Kerala on May 30th, compared to the usual June 1st, and has already covered much of South India. A consistent monsoon is expected to result in healthy kharif crops, leading to better farm income and a modest rise in food prices for consumers, said the brokerage.

Crude oil prices have decreased by 10% over the past 7–10 days. Crude oil and its derivatives are essential inputs for various FMCG products and their packaging, with packaging costs constituting 5-20% of many companies’ input costs.Also Read: Chandrababu Naidu's wife earns ₹584 crore in five days from this FMCG stock "We expect the steady input price environment to persist due to a lack of major supply-demand mismatch/disruption.

Thus, we expect better gross margin trajectories for most of the companies that we cover, aided by better mix and price increases in some cases (alcoholic beverages, Emami.)," said Anand Rathi. The brokerage's analysis of 11 FMCG companies (excluding ITC) shows that Q4 revenue grew by just 3.3%, a significant