FMCG Stocks Tumble 6% on Slowing Demand, ITC Leads Slide

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AuthorSimar Singh|Published at:
FMCG Stocks Tumble 6% on Slowing Demand, ITC Leads Slide
Overview

The Nifty FMCG index has fallen nearly 6% in 2026, lagging the broader market. This downturn is largely fueled by a significant 20% drop in ITC shares, with other key players like Varun Beverages and Patanjali Foods also experiencing declines. Analysts point to slowing consumption patterns and tepid volume growth as primary concerns for the sector, though some remain selectively bullish on specific stocks with clear earnings visibility. Hindustan Unilever posted a mixed quarterly result.

The Nifty FMCG index's 6% slide in 2026 starkly contrasts with the Nifty 50's modest 0.8% dip. This underperformance is heavily weighted by ITC's dramatic 20% retreat in the year, pushing its shares to Rs 317. The stock has now shed nearly 29% from its May 2025 peak of Rs 444.20 on the NSE.

Sector Headwinds

Other significant decliners in the sector this year include Radico Khaitan, Varun Beverages, Emami, Patanjali Foods, and Tata Consumer, all losing up to 16%. Analysts foresee continued challenges. G Chokkalingam of Equinomics Research cites tepid volume growth despite favorable agricultural conditions, attributing the issue to slowing consumption patterns. "The sector faces rough terrain," he stated.

ITC's Tax Hit and Outlook

ITC's substantial decline, Chokkalingam believes, is an overreaction to the cigarette tax hike. He projects ITC to outperform peers with a price target of Rs 380 for 2026, representing a near 20% upside. Brokerages like Axis Securities, Elara Capital, and Systematix maintain hold or accumulate ratings on ITC. Elara Capital analysts, however, revised earnings estimates downward by 12.1% and 13% for FY27E and FY28E, respectively, factoring in the tax impact, and foresee a -3.3% EBIT CAGR for ITC's cigarette business through FY26E-28E due to the tax increase.

Hindustan Unilever's Mixed Quarter

Hindustan Unilever (HUL) reported a standalone net profit of Rs 7,075 crore for the October-December 2025 quarter. This figure includes a substantial one-time gain of Rs 4,516 crore from discontinued operations following its ice cream business demerger. Excluding these exceptional items, profit after tax saw a marginal 1% increase, reaching Rs 2,562 crore. The company also recorded an exceptional cost of Rs 113 crore related to new labor code implementation. Despite the overall profit figure, HUL's stock slipped nearly 3% on the NSE to an intra-day low of Rs 2,383.10.

Selective Investment Strategy

Geojit Investments' Gaurang Shah favors a selective approach, anticipating an improvement in semi-urban and rural demand. He expects profit margins to benefit from easing input costs but cautions companies on advertising and promotional spending. Shah remains positive on Britannia, Nestle, HUL, ITC, Godrej Consumer, Tata Consumer, Dabur, and Marico, forecasting 12-15% upside for these stocks in the remainder of 2026. Independent expert Ambareesh Baliga advises investors to focus only on stocks with clear earnings visibility. He highlights Dabur, Emami, and Marico for potential 18-20% upside, contingent on supportive economic growth, and views ITC as a contrarian buy.

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