Budget 2024: FMCG stocks surge up to 6% on govt’s plans to support rural economy; Nifty FMCG touches fresh high

FMCG stocks have surged in today's trade as investors responded positively to the government's strong emphasis in Budget 2024 on boosting rural consumption. The budget outlined several initiatives aimed at boosting rural consumption, expected to support a recovery in FMCG sector volumes.

Despite front line indices ending today's session on a flat note, the Nifty FMCG index hit a fresh all-time high of 62,755 points, gaining nearly 3%. Among individual stocks, ITC surged 5.6%, Tata Consumer Products, Godrej Consumer Products, Marico, United Spirits, Procter & Gamble Hygiene & Healthcare, and HUL ended with gains between 1% and 4.3%.

Finance Minister Nirmala Sitharaman announced an allocation of ₹2.66 lakh crore for rural development, including infrastructure improvements. Sitharaman also revealed that 109 new high-yield and climate-resilient crop varieties will be introduced, and a national cooperation policy will be developed to advance the cooperative sector.

"Our government will bring out a national cooperation policy for systematic, orderly, and all-round development of the cooperative sector. Fast-tracking growth of the rural economy and the generation of employment opportunities on a large scale will be the policy goal," said Nirmala Sitharaman.

The budget also includes ₹1.52 lakh crore for agriculture and allied sectors, and Phase 4 of the Pradhan Mantri Gram Sadak Yojana (PMGSY) will be launched to ensure all-weather connectivity for 25,000 rural habitations.

On the other hand, the government's emphasis on rural development is set to positively impact the 2-wheeler market, which is crucial for domestic manufacturers such as Bajaj Auto, TVS Motor, and Hero MotoCorp. Since taking office for a third term, the BJP-led NDA government has introduced several initiatives to enhance rural consumption.

These include increasing the Minimum Support Price (MSP), providing a ₹2,000 instalment for farmers and offering financial aid for the construction of 30 million new houses in both rural and urban areas.

Commenting on the budget, Vikas Khemani, founder of Carnelian Asset Management & Advisors, said, "The overall budget appears balanced, with the new coalition government clearly focusing on agriculture, manufacturing, employment generation, youth skilling, MSME support, and urban infrastructure development. This budget sets priorities for a "Viksit Bharat." Initiatives like the credit guarantee scheme for MSMEs and Mudra Loans are positive steps for MSME growth."

"In terms of tax reforms, the increase in LTCG by 2.5% and STCG by 5% could have been avoided, but it is not expected to significantly impact market sentiment. The budget maintains a good fiscal deficit and yet focuses on channeling resources to the desired sections. We remain confident in investing in India and believe in the vision of Viksit Bharat 2047. Many sectors like manufacturing, agriculture, infrastructure, and consumption will benefit from this budget," Vikas Khemani added. 

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.