Fast-moving consumer goods (FMCG) companies expect the new government to be more consumption-focused, as the attention shifts to managing alliance partners with the return of coalition politics at the Centre.The country delivered a mixed mandate on Tuesday, with the ruling BJP, which leads the National Democratic Alliance (NDA), falling short of a majority in the 2024 Lok Sabha elections.
The BJP now has to depend on alliance partners such as the Telugu Desam Party (TDP) and the Janta Dal United (JDU) to run the government for the next five years.In a conversation with FE, Nadir Godrej, chairman and MD, Godrej Industries, said more representation in Parliament was good for the government of India. “Education, healthcare and good livelihoods will help the people who need it the most. These policies will also aid the economy in terms of growth. I am hopeful that the government will listen to other voices whether within the alliance or outside of it even as they look at more people-centric policies that can aid consumption,” Godrej said.
Mohit Malhotra, chief executive officer, Dabur India, said despite a mixed mandate, the NDA would continue in power. “Of course, the dynamics of coalition politics exist, which will have to be carefully navigated,” he said. “I see a shift from infrastructure development to consumption, including direct benefit transfers to rural consumers, greater allocation to MGNREGA and higher minimum support price for crops,” he added.
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Before the announcement of election results on Tuesday, the benchmark Nifty was up 4.2% in FY25, while the Nifty FMCG index was up 1.3%. But the picture has changed in the three days since the poll outcome. The sectoral index is now up 6.4% and the benchmark is up 2.2%, data shows.“Market expectation prior to elections was on pro-infrastructure measures, which were perceived to benefit consumption with a lag. We now believe that the current majority will keep the government on its toes with pro-consumption initiatives being key,” brokerage Emkay Global said in a note.
“I see the mixed mandate as a positive for FMCG,” said Krishnarao Buddha, senior category head, Parle Products. “There is a forecast of a good monsoon, commodity prices have been benign and now with coalition politics coming back at the Centre, the government may have to give something to consumers to boost demand. This augurs well for FMCG,” he said.Experts said the BJP-led NDA won 221 rural and semi-rural Lok Sabha constituencies in the just-concluded general elections compared with 251 rural and semi-rural constituencies in 2019.
The Congress-led INDIA bloc won 157 rural and semi-rural constituencies in the 2024 election. The INDIA bloc did not exist in 2019.In its analysis on the elections, Goldman Sachs said it saw spending reallocation towards welfare. It also upgraded consumer staples from ‘underweight’ to ‘neutral’. Emkay Global has upgraded its rating on bellwether Hindustan Unilever from ‘add’ to ‘buy’, and on Nestle India from ‘reduce’ to ‘add’.“This is the first time in 10 years that the BJP will be running a government without a majority on their own in the Lok Sabha. This is a key monitorable,” Goldman Sachs said.
HSBC Global Research said in a report on Thursday that it saw a strong Opposition helping in introducing checks and balances. “We expect existing reforms that the Modi government has been spearheading (e.g. the public capex thrust) to continue. But welfare spending could rise. However, it can coexist with gradual fiscal consolidation as tax growth has been strong,” it said.UR Bhat, co-founder of Alphaniti Fintech, said based on how the election results have panned out, it looks likely that FMCG stocks may outperform going ahead. “But a confirmation of that will come when portfolio allocations happen after the Budget,” he said.
From: financialexpress
Financial News
