The Reserve Bank of India's (RBI's) caution on inflation, highlighted during the recent monetary policy meeting, may put investors' faith in fast-moving consumer goods (FMCG) stocks to test, analysts said.
They, however, believe FMCG stocks may ride through this near-term investor anxiety as related companies are, typically, well-equipped to handle inflation due to their pricing power and steady demand for essential goods. They suggest investors use any near-term dips to accumulate quality stocks for the long term.
“The RBI's recent comments on inflation could prompt caution around FMCG stocks due to potential pressure on profit margins from rising input costs. That said, despite the short-term corrections, the sector remains a defensive play due to its stable cash flows and resilience,” said Nirav Karkera, head of research at Fisdom.
On Wednesday, RBI Governor Shaktikanta Das pointed out that core inflation, which excludes food and fuel prices, was on an uptrend in July and August even as headline consumer price index (CPI) inflation decreased during this period.
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