Why Nifty FMCG was the Best Performing Sector in the Post-budget 2023 Sessions?

Union budget 2023 proposals that had a positive impact on the Nifty FMCG stocks

Budget 2023 increased capex

While the Adani group stocks played a dampener on budget day, FMCG stocks have shown signs of promise in the days after the union budget. Nifty FMCG ended the budget day as the best-performing segment, with a surge of 1.13%. Stocks like Zydus Wellness, ITC and Varun Beverages performed in the initial post-budget trading. 

Let us look at the various recommendations that the budget proposed that can be attributed to the encouragement received by Nifty FMCG traders and investors.

Also Read: Top 3 best performing sectors in the Indian stock market: future prospects 2023

Budget 2023 and the FMCG Sector

  • The FMCG sector expressed satisfaction with the union budget 2023. The budget announced a capex outlay of Rs 10 lakh crore. This is an increase of 33% and the outlay is expected to strengthen the middle class financially. This will see higher spends on FMCG, which will benefit the entire supply chain of sellers, manufacturers and intermediaries. 

  • Apart from the Rs 10 trillion capex allocation, the budget also allocates interest-free loans of Rs 1.3 lakh crore for infrastructure development. The budget also aims to boost the manufacturing sector, with a focus on renewable energy, farming and MSME. Banking credit in this segment will continue in a sustained manner. 

  • Food FMCG will benefit from the capex allocation with impetus on food grains, and investment in decentralised storage for farmers. Improvement in the rural supply-chain efficiency will boost the Indian economy and cascade benefits to the FMCG sector in general. 

  • The budget specifically highlights India’s aim to become a global giant in millet. FMCGs are likely to increase their millet-based offerings which would increase their product line and consequently consumption.

  • Income tax slab and rate changes will allow higher spend and consumption capacity for the country’s middle class. The FMCG segment expects to be one of the key beneficiaries of the higher disposable income through tax changes.

  • The government intends to run the Free Food Scheme for one year. The budget also gives special focus to dairy and fishery products. The PM Matsya Sampada Yojana has been allocated Rs 6,000 crores to develop more fisheries. All these initiatives are closely linked with an increase in production and consumption. 

Also ReadKR Choksey recommends these 6 stocks for January 2023 with and upside of 13% to 33%

The budget proposals are expected to intensify the demand cycle and support the FMCG sector specifically. Besides, the evergreen nature of the sector will also encourage long-term investment in these stocks.

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