Stock market practice of profit booking stalls FMCG rally

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Posted by AI on 2025-09-05 10:59:02 | Last Updated by AI on 2025-09-07 16:32:46

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Fast-moving consumer goods (FMCG) stocks slipped on Friday as investors booked profits after a strong five-day rally, with Nestle and Varun Beverages among the top drags on the index.

Profit booking is a common phenomenon in which investors sell assets that have increased in value to lock in their profits.

The FMCG index, composed of toothpaste, soaps, detergents, and other fast-selling consumer goods, fell 2.7% on the NSE.

This came after the index saw a 5% rally over the previous five sessions, aided by value buying and a decline in crude oil prices, which help reduce input costs for companies.

Prices of most FMCG products are heavily influenced by central bank policies regarding interest rates and money supply, as higher spending on consumer items is typically discouraged by higher rates.

"The FMCG pack seemed to be overbought, and investors probably decided to book profits," said Deepak Jasani, head of retail research at HDFC Securities.

"They will possibly re-enter their positions if the market turns favorable again."

Nestle India slipped 3.1%, its most significant percentage decline since mid-December, dragging down the Nifty 50 index.

Varun Beverages, which makes PepsiCo beverages in India, fell 2.1% after gaining nearly 8% over the previous four sessions.

"There's also some cautiousness ahead of results, as the September quarter results season has begun," Jasani said.

"FMCG is a defensive pack, and they usually outperform when markets are weak, so they are still expected to do well despite the slight correction today."

Market analyst Motilal Oswal Securities also noted that FMCG stocks were overdue for a correction and advised investors to buy selectively.

"Some correction was overdue in FMCG, and it can be used as an opportunity to buy good fundamentals and stocks with strong balance sheets and decent growth," it said in a note.

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