Indian equity benchmarks traded on a cautious note on Tuesday, 27 October and ended flat, as elevated crude oil prices and geopolitical tensions in the Middle East weighed on investor sentiment. The weakness has been particularly pronounced in the FMCG sector, with the Nifty FMCG index extending its decline amid sustained selling pressure. The index hit a fresh 52-week low of 42,800.75 on 26 October and traded largely flat to positive on Tuesday. It closed at 43,118 . 20, touched an intraday low of 42,454.50 and a high of 43,119.75.
The Nifty FMCG index has fallen over 22% year-to-date (YTD) and about 16% over the past six months, significantly underperforming the Nifty 50, which has declined around 13% YTD and 6% over the same six-month period. Technically, the FMCG index remains in a strong downtrend, forming a lower-top, lower-bottom pattern.
Technical experts note that recovery attempts are facing selling pressure, particularly as prices approach the 20-day exponential moving average (20-DEMA), suggesting that bears continue to dominate the trend.
The sustained correction has also challenged the sector’s reputation as a defensive investment, with 13 FMCG stocks delivering negative returns over the past year. Shares of Godfrey Phillips India have plunged (- 47%), followed by Patanjali Foods (-42%), ITC (-39%), United Breweries (-37%), Dabur India (-29%), Colgate-Palmolive India (-28%), Godrej Consumer Products (-26%), Hindustan Unilever (-25%), Britannia Industries (-23%), Tata Consumer Products (-15%), Varun Beverages (-11%), Nestlé India (-9%) and United Spirits (-6%).
Why are FMCG stocks under pressure?
FMCG stocks are facing pressure due to rising input costs, slowing growth expectations and concerns over consumer demand. Higher commodity prices, particularly crude oil and palm oil, are squeezing margins as companies struggle to pass on the full cost increase to consumers, as per reports.
According to HSBC, growth across its consumer staples coverage, excluding ITC, is expected to moderate to around 10% in the second half of FY27 from 14% in the first half. Elevated food inflation could further weigh on household purchasing power and demand for packaged foods and personal care products.
Meanwhile, investors remain cautious about valuations, with commodity inflation and potential El Niño-related risks adding to concerns over earnings growth.
Kranthi Bathini, equity strategist at WealthMills Securities Pvt Ltd, said FMCG stocks are undergoing a consolidation phase as rising input costs and an inflationary environment put pressure on the sector, despite companies reporting healthy results.
He noted that organised FMCG companies are facing changing consumer preferences, with consumers increasingly exploring organic products and regional brands. Private-label products offered by organised retailers are also intensifying competition, putting pressure on margins in the short- to medium-term.
“While the festive season could support demand for FMCG companies, persistent inflation and rising input costs are likely to keep margins under pressure in the near to medium term,” Bathini said.
Diwali shopping opportunity for investors?
Gaurav Arora, Head of Research at SAHI, said FMCG stocks could see renewed buying interest over the next couple of weeks as Diwali-related demand builds through early November.
He noted that last year’s GST 2.0 rate cuts created an unusually strong base for the 2025 festive season. With Diwali falling later this year, on 8 November, any improvement in October demand could appear muted due to the high base effect rather than reflect an actual weakness in consumption.
Arora expects a potential near-term bounce from current support levels but cautioned that the recovery could be a short-lived, festival-led move rather than the beginning of a sustained uptrend. He said investors should watch whether the Nifty FMCG index can hold above the 42,000 level and build on any recovery, rather than treating a bounce as confirmation of a trend reversal.
Technical levels to check
Gaurav Arora, Head of Research at SAHI, said the Nifty FMCG index has been in a prolonged correction since its September 2024 peak, with both time and price corrections playing out simultaneously. The index recently hit a fresh low near 42,000, which now serves as an immediate support level to watch. A breach of this level could expose the index to the next key support zone around 40,500.
Sachin Gupta, Vice President – Research at Choice Broking, said the Nifty FMCG index, trading around 42,610, has hit its 52-week low and is approaching a crucial demand zone between 39,400 and 42,000 on the monthly chart. This range has acted as a strong support area in the past, triggering significant rallies, making it an important zone to watch for potential stabilisation.
He noted that the technical significance of this zone is reinforced by the 61.8% Fibonacci retracement level near 39,400. The monthly Relative Strength Index (RSI) stands at 33.90, reflecting sustained selling pressure and approaching oversold territory. Gupta added that the RSI has reached this level for the first time in the index’s historical chart, raising the possibility of a recovery if buying interest emerges.
Gupta also highlighted key support levels in major constituents. Hindustan Unilever, trading around ₹1,770, is approaching support at ₹1,730, while ITC, at around ₹257, is nearing its 200-month exponential moving average (EMA) of ₹253.70. Varun Beverages, trading around ₹407, is moving towards support near ₹381, which coincides with its lower Bollinger Band. Stabilisation in these stocks could lend support to a broader recovery in the FMCG index.
If the index holds within the 39,400–42,000 demand zone and major constituents show signs of a reversal, a gradual recovery towards 46,000–49,700 could unfold over the short- to medium-term, Gupta said. However, he cautioned that the recovery outlook remains conditional on support holding and reversal signals emerging. A decisive monthly close below 39,400 would weaken the bullish scenario, making price action around the demand zone and technical signals in key constituents critical to determining the index’s next move.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
