Post-Budget Rally: Nifty FMCG climbs 2%, seven stocks achieve record highs

Despite benchmark Indian indices facing selling pressure following the Union Budget 2024, FMCG stocks have surged as the government prioritizes enhancing rural consumption through increased allocations for various rural schemes.

The government further announced various schemes for employment and skilling youth, anticipated to rejuvenate rural and urban consumption.

Amid this backdrop, the Nifty FMCG index rose by 2% over the last three sessions, reaching 62,139 points. On budget day, the index surpassed the 62,000 mark for the first time and subsequently hit a new record high of 62,731, approaching the 63,000 level.

Notably, several individual stocks, including Britannia Industries, ITC, Tata Consumer Products, Dabur India, United Spirits, Colgate-Palmolive (India), and Godrej Consumer Products, achieved fresh all-time highs following the budget announcement.

Although India's economy is expanding rapidly, it is not evenly distributed. Rural areas, in particular, have lagged behind overall economic growth. The pandemic exacerbated this disparity, with rural demand suffering significant setbacks, compounded by adverse weather conditions.

However, recent data, including a rebound in two-wheeler sales and a slight uptick in FMCG volumes, suggests a revival in rural demand. To further stimulate the rural economy—a key component of India's overall economic structure—the government allocated ₹2.65 lakh crore for agriculture and allied activities and ₹1.52 lakh crore for related initiatives in the budget.

These enhanced allocations are anticipated to strengthen the FMCG sector, which represents 35% of rural sales. Simultaneously, boosting urban consumption will be achieved through various measures, including increased standard deductions, higher family pension deductions, revised slab rates under the new tax regime, and direct benefit transfers to first-time workers.

Meanwhile, 3 crore additional houses under the PM Awas Yojana in rural and urban areas of the country have been announced. The government has announced PM Awas Yojana-Urban 2.0 and has proposed assistance of ₹2.2 lakh crore from government over the next five years. Housing needs of 1 crore urban poor and middle-class families to be addressed with total investment of ₹10 lakh crore.

To transform agriculture research and support natural farming, the government has outlined several key initiatives. These include enhancing production for pulses and oil seeds, promoting large-scale vegetable cultivation near consumption centers, and facilitating digital public infrastructure for agriculture.

Additionally, there are plans to develop 109 new high-yield crop varieties and strengthen the production of oil seeds and lentils. The focus is also on achieving self-reliance in oil seed output.

The PM Garib Kalyan Yojana has been extended for five years, benefiting more than 80 crore people. The Pradhan Mantri Janjatiya Unnat Gram Abhiyan will benefit 63,000 villages. Improved road connectivity through PMGSY will connect 25,000 rural habitations, according to Axis Securities estimates.

Further, the government increased the allocation to MGNREGA to ₹86,000 crore from ₹60,000 crore last year.

This budget will indirectly benefit the rural sector through infrastructure improvements, tourism, fisheries, and skill development. Initiatives like PMGKAY will contribute to increased rural income, reducing reliance solely on agricultural income.

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