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Below View on Quote on FY24 FMCG Sector outlook By Vincent KA, Research analyst at Geojit Financial Services.

We expect FMCG sector revenue growth to be in the mid-teens for FY23, mainly supported by price growth as the companies had taken price hikes to compensate for the elevated input prices while volumes were weak. Margins were impacted but started to showcase some improvement in the second half of FY23 due to a decline in input prices. Now, since the inflation is coming down, we believe the margins will improve in the coming quarters. Companies indicate some green shoots in rural demand recovery, though it is yet to pick up meaningfully. The reduction in inflation and the strong GoI’s rural push will support demand in FY24. However, a normal monsoon is an essential factor for a meaningful demand recovery in rural areas, and there are reports of the possibility of El-Nino this year, but the real impact will depend upon the actual distribution of rainfall during June–September. We anticipate FMCG sector revenue growth to be in the low double digits in FY24, aided by volumes. Currently the sector is trading 5% above its 5-year average valuation, which is expected to continue in the short term. However, we are cautious in the medium term due to growing concerns regarding the current heat wave and El Nino, which are likely to increase the cost.

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