Union Budget 2019: FMCG, consumer durables stocks may log gains as govt likely to announce relief in income tax

With the Indian economy showing clear signs of a major slowdown, FMCG and consumer durable sectors are pinning hopes on Prime Minister Narendra Modi-led NDA government to throw several surprises in Budget 2019 to boost consumer sentiments, particularly in rural markets. This would in turn provide support to their stocks in the market.

Finance Minister Nirmala Sitharaman will present her maiden Union Budget 2019 on July 5, which will be keenly watched by the Dalal Street. In order to kick start the economy, and to encourage investments, Sitharaman may raise income tax exemption limit for an individual income tax payee, which can boost consumption-based stocks. This could bode well for the FMCG and consumer durables stocks which hope for a rise in incomes so that the consumption slowdown in these sectors is addressed.

FULL COVERAGE:  Union Budget 2019

It is noteworthy that fourth-quarter earnings numbers of many fast-moving consumer goods (FMCG) and consumer durables firms were weak as they experienced significant headwinds due to muted demand, which is also an indicator of a slowing economy.

Companies in the FMCG and consumer durables segment will look out for announcements made regarding income tax slabs and direct taxes. More money in the hands of the people means a higher demand for goods.

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Jagannadham Thunuguntla, senior VP and Head of Research (Wealth), Centrum Broking, said, "If Budget happens to increase I-T exemption limit, it can be solid sentiment boost to stimulate discretionary spends in the segments such as Auto, FMCG, and Consumer Durables."

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FMCG and consumer durables firms such as ITC, HUL, Nestle, Britannia, Emami, Dabur India, Marico, Colgate-Palmolive (India), P&G Hygiene & Health Care, Bajaj Electricals, Voltas, Symphony, Blue Star, IFB Industries and Whirpool will look for policies and schemes that can have positive impact on these sectoral indices. These are big names that have done extremely well in the past.

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A couple of measures such as income tax exemptions to taxpayers and sops for the middle class will bring in a lot of liquidity to the market in terms of investment, which will have a positive impact on these consumption-based stocks.

Edited by Chitranjan Kumar