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With FMCG stocks pining, could rural India be shining?

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With FMCG stocks pining, could rural India be shining?

The unabated hammering of the fast-moving consumer goods (FMCG) majors is raising doubts whether the rural India is actually shining. Touted as defensive sector, FMCG stocks have plummeted upto 52 per cent, making marketmen wonder what’s happening to the rural demand.

FMCG heavyweights have considerably underperformed the benchmark BSE Sensex which was marginally in the red, losing about 1.1 per cent during this period.

Hindustan Lever, which has a 5.7 per cent weightage in The Stock Exchange, Mumbai’s (BSE) Sensex and a 38 per cent weightage in the BSE FMCG index, has lost 27.38 per cent in the current calender so far to close at Rs 154.4 on March 9. This has wiped out about Rs 13,000 crore in market capitalisation from the bourses on this counter.

GlaxoSmithkline Consumer has tanked 52.32 per cent since its close of Rs 587.65 on January 1 to Rs 280.2 on March 9.

The other FMCG majors which have seen a sharp erosion in their prices and market capitalisations include Henkel Spic, Nirma, Colgate Palmolive, Gillette India, Proctor & Gamble, Nestle and Dabur. These stocks have crashed 11-44 per cent during the period.

As a result of these battering, BSE’s FMCG Index has tumbled down 12.71 per cent since January 1, 2004 to close below 1,000-mark at 992.9 points on Monday as against 1,137.42 points on January 1, 2004 as against a negative 1.1 per cent gain in the Sensex. HLL has the highest weightage of about 38 per cent in this index.

‘‘There has been expectation that the good monsoons last year would bring about a rise in demand for consumer goods. Since the sector reflects the economy, it raises a question mark on whether the rural economy is at all shining,’’ said Indiabulls equity analyst Dinesh Chandel.

‘‘Demand due to good monsoons takes 6-9 months of time lag to materialise. It certainly did not increase in the last two quarters. And the prices cuts by Proctor & Gamble and Hindustan Lever reflects that the demand has not increased till now,’’ he added.

HLL’s net profit for the year ended December 2003 had increased only marginally by 0.12 per cent to Rs 1,771.79 crore while the total income rose 2.5 per cent to Rs 10,598.18 crore during the period.

Quarterly total income had dipped 1.85 per cent, thanks to the pricing pressures and decline in the sales of soaps and detergents. Food segment of their business had taken a major hit.


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