Nestle India, HUL to Emami – FMCG stocks defy market slump, rise up to 5% as RBI cuts rate, inflation outlook improves

Indian stock market: Defying weakness in the broader market, Indian FMCG stocks traded in the green on Wednesday, April 9, as investors reacted positively to the RBI’s repo rate cut and downward revision of the inflation forecast, raising optimism that it would boost consumer goods volumes in the new fiscal year.

Amid this positive sentiment, the Nifty FMCG index jumped 2%, hitting the day’s high of 55,412 points, with 14 out of 15 constituents trading in positive territory.

Among the top gainers, Emami led the pack with a 4.5% rise, followed by Godrej Consumer Products, Nestle India, Colgate-Palmolive, Marico, HUL, Britannia Industries, and Dabur India, which traded with gains between 2% and 3.3% as of 1:15 P.M.

RBI delivers second consecutive rate cut

As widely expected, the Reserve Bank of India (RBI), in its first bi-monthly policy meeting of FY2025–26, announced a 25-basis-point cut for the second consecutive time and shifted its stance from 'Neutral' to 'Accommodative.'

The policy change indicates that the RBI is well-positioned to cut rates further, if necessary. With a total 50 basis point reduction over the last two meetings, the RBI has brought the repo rate—the rate at which it lends to commercial banks—down to 6% from 6.5%.

The cooling of inflation concerns over the past few months has given the central bank the confidence to proceed with a second rate cut. To stimulate urban consumer demand, both the RBI and the government have taken significant steps.

The Union Budget 2025–26 announced an increase in the income tax exemption limit to ₹12 lakh, which was followed by the RBI’s first rate cut in nearly five years, putting more disposable income in consumers' hands and aiming to boost consumption, a key driver of the Indian economy.

India is facing its own growth challenges, particularly due to weaker demand from urban consumers, as reflected in the recent volume performance of consumer goods companies. This slowdown has also impacted their share prices, with many stocks now trading up to 36% below their recent peaks.

The implementation of 26% reciprocal tariffs on India, effective from today, has added further concerns to an already slowing domestic economy. Amid these challenges, the Reserve Bank of India (RBI) has lowered its growth forecast for FY26 to 6.5% from 6.7%.

Inflation forecast lowered as vegetable prices cool

Indian FMCG companies in recent months saw a shift in consumer preference toward smaller packs amid rising food inflation, which impacted margins; however, the recent easing in food inflation—driven by a decline in vegetable prices—offers relief and may support a recovery in consumer demand.

The Indian central bank said that inflation is expected to remain under control in the financial year 2025-26. The RBI Governor Sanjay Malhotra projected Consumer Price Index (CPI) inflation for the year at 4.0%, assuming a normal monsoon. This is lower than current levels and shows improvement in price stability.

He said, "On the inflation front, while the sharper-than-expected decline in food inflation has given us comfort and confidence, we remain vigilant to the possible risks from global uncertainties and weather disturbances."

According to the RBI, the food inflation outlook has turned positive. Vegetable prices have seen a broad and significant seasonal decline. For FY26, inflation is expected to be 3.6% in the first quarter, 3.9% in the second quarter, 3.8% in the third quarter, and 4.4% in the fourth quarter.

Earlier, the CPI forecast for Q1FY26 was at 4.5% and Q2FY26 at 4%. However, RBI increased Q4FY26 CPI estimates from 4.2% earlier.

As per the central bank's latest data, the Consumer Price Index headline inflation dropped by a cumulative 1.6 percentage points between January and February 2025, falling from 5.2% in December 2024 to a low of 3.6% in February 2025. The sharp drop in vegetable prices has helped in cooling down the retail inflation.

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