HLL boosts FMCG stocks, index touches all-time high

FMCG Index closes at 1950.79, gaining 3 per cent.

The fast moving consumer goods (FMCG) index on the Bombay Stock Exchange (BSE) closed at an all-time high of 1,950.79 on Wednesday, gaining 3.56 per cent.

The surge is being attributed to the robust Q4 performance of FMCG major Hindustan Lever (HLL).

"The growth in Q4 results of HLL was the only factor behind the upsurge in the index as it has a high weightage in the FMCG index," said Jay Prakash Sinha, analyst, Kotak Securities.

HLL surged 5 per cent to reach an all-time high of Rs 236.5, extending Tuesday's upswing triggered by strong results. Around 48 lakh shares were traded.

The investors are betting big on the FMCG firms' increased focus on the rural sector, which is emerging as a potential market.

"HLL's solid performance can be attributed to the increase in rural demand. As the rural demand has picked up very well, the investor sentiments are bullish across the companies in this sector," Sinha added.

"Increase in both volumes and prices of the products helped HLL register good result. Volumes have surged largely owing to the general buoyancy in the economy. Also, HLL managed to successfully increase its prices across product lines", said Raveendra H C, research analyst, Angel Broking.

"Most of the HLL's revenues come from its soap and detergent business. The input cost in detergents has been on the rise as it moves in tandem with crude oil. But, the rise in prices of detergents has eased the pressure on the margins. Also, the prices of palm oil, the major ingredient for soaps, have stabilised. Comfort on the raw material side combined with a good demand and high prices have resulted in good revenues from this segment," said Raveendra.

Also, tea scrips continued march northwards and contributed to the rise in the index. Tea prices are bound to rise in wake of the shortage owing to severe drought in Kenya.

"The demand - supply gap is likely to continue for the next two years", added Raveendra.

FMCG index has produced return of 72.05 per cent over the year whereas Sensex has given return of 51.01 per cent. Last month, the FMCG gave returns of 13.85 per cent while the sensex yielded 8.33 per cent.