With rural market yet to rebound & El Nino risks in sight, should investors flock to FMCG stocks?

The earnings of FMCG companies for the March quarter were lacklustre due to subdued domestic demand, reflecting a weak rural market that makes for 30-40% of sales for consumer staples firms. Volumes have taken a hit over the last few quarters as inflation has damaged consumption, leading to down-trading in certain categories. However, with the easing of commodity prices, companies saw a recovery in their profitability. El Nino weather phenomena could derail the recovery in rural FMCG, though most large and midcap FMCG stocks have outperformed benchmark Nifty 50 over the last year.