Consumer goods, durables stocks in demand post Budget

The Finance Minister's decision to reduce the overall tax slabs for individuals during the Union Budget 2010 proposals will translate into higher spending power for the tax-payers. The proposal to raise the tax slabs will benefit 60 per cent of all tax payers, said Mukherjee in his budget speech.

Such a move is especially welcome at a time when the middle class is already grappling with double-digit food inflation.

This simple equation seems to have gone down well with investors as can be seen from the movement in FMCG scrips post Budget proposals. The FMCG index has surged 6% from Budget day on expectations of a higher consumer spending. The index has gained 156 points from its close (2,662.05) on February 26, 2010 and is trading at 2,818 levels on March 15, 2010.

Among the FMCG stocks, cigarrette-maker, ITC has been the one of the most prominent gainer despite proposals to increase the excise duty by 2 per cent. The scrip has risen 12 per cent to Rs 260 levels since then.

Godrej Consumer Products (up 13%) and Colgate-Palmolive (up 5.3%) are among the other leading gainers in this space. Other gainers include Nestle (up 4%), Marico (up 2%) and Tata Tea (up 0.7%).

Among consumer durables, the air-conditioning sector has also reaped rich returns. Hitachi Home soared 33% to Rs 226 levels, while Fedders Lloyd and Blue Start have rallied 9% each. Lloyd Eelctric has gained 3% at Rs 57 since then.

The domestic appliances industry also seemed to have seen their share of profits. Whirlpool of India has soared 21% to Rs 171. Salora International gained 10%. MIRC Electronics and BPL have surged 5-8% each. Gains are also visible in Bajaj Electric that moved up over 2% to Rs 199 levels.

Price hike

The decision to increase excise duty by 10% would mean the companies will pass the load to consumers through a price increase. As such, some companies have seen a negative movement in their stock prices.

Britannia Industries has shed 5.2% to Rs 1,583, while Ruchi Soya and Dabur India skidded 5.6% and 1.6%, respectively since February 26, 2010.

FMCG major, Hindustan Unilver, lost 4% to Rs 226 levels on fears of a price war among the detergents category. According to reports, the company's competitor Procter & Gamble raised the weight of its 'Tide Naturals' detergent powder by 25%, effectively offering consumers lower pricing.