The Trend of Subdued Volume Growth Reversing for FMCG Companies

The volume growth as reported by top FMCG players in their second quarter results is nothing but encouraging. Heavyweights such as Hindustan Unilever India, Emami and Bajaj Corp reported decent volume growth of 4%, 10% and 5.1% respectively. The growth comes after back to back quarters of de-growth or sluggish growth.

A spurt in the volume growth essentially means that the FMCG players would now be in a better position to take price hikes. Realizations could improve on account of this, leading to better margins.

However, it needs to be seen whether the spurt in the volumes is mainly on account of an increase in the demand from the end users.

On account of implementation of goods and service tax (GST), a lot of destocking had happened at the end of distributors in the first quarter. Restocking of goods in the second quarter may have contributed to the volume growth.

Provided, the volume growth has come in from the end user and that too from the rural territory, it would be good news for the FMCG companies.

Crude Hits 60 Dollars

From the lows of 30 dollars in 2016, the crude prices have now risen to 60 dollars. Oil prices rose as both US crude production and inventories declined. With, Organization of Petroleum Exporting Countries (OPEC) cutting production, global oil markets seem to be broadly balanced now after years of oversupply.

The rise in the crude prices, could be negative for companies for whom crude is the main raw material. Some of the industries in which crude and its derivatives is the main raw material are paints, FMCG, aviation, oil and cosmetics industry.

Should One Subscribe to the IPO of New India Assurance?

New India Assurance is a leader in the general insurance category with an overall market share of 15% in FY17. The company has witnessed a CAGR of 15.18% in gross written premium over FY13-17 which was almost in-line with non-life insurance industry growth of 15% CAGR over FY11-16.