It could be a rough road ahead for the sector as companies grapple with tepid volume growth and slowing consumption despite good monsoons and healthy food grain production.

Image used for representational purpose only. Photograph: Mansi Thapliyal/Reuters

Stocks of fast-moving consumer goods companies have taken it on the chin in calendar year 2026 (CY26) with the Nifty FMCG index falling over 6 per cent compared to the Nifty 50 dipping 0.8 per cent.

Nifty FMCG is one of the worst-performing sectors on the NSE in CY26.

What lead to this underperformance

The underperformance is driven by a fall in ITC stock that has tanked 20 per cent in CY26 to Rs 317.

From a 52-week high of Rs 444.2 on May 27, 2025 on the NSE, the FMCG counter has skidded nearly 29 per cent till date.

Radico Khaitan, Varun Beverages, Emami, Patanjali Foods, and Tata Consumer have lost up to 16 per cent on the NSE, ACE Equity’s data shows.

Rough road ahed for the sector

It could be a rough road ahead for the sector as companies grapple with tepid volume growth and slowing consumption despite good monsoons and healthy food grain production, said G Chokkalingam, founder and head of research at Equinomics Research.

Chokkalingam believes ITC is likely to outperform most FMCG stocks; he has a price target of around Rs 380 levels for the counter in 2026  —  up nearly 20 per cent from current levels.

“The punishment given by the markets to ITC stock post the tax hike on cigarettes has been more than what it deserved.

“Its other businesses are on a stable footing, and cigarette volumes should pick up over time.”

Brokerages Axis Securities, Elara Capital and Systematix have a hold or accumulate rating on the counter despite the recent developments.

“We cut our earnings estimates (for ITC) by 12.1 and 13 per cent for FY27E/FY28E (estimated), respectively, to factor in the impact of tax hike on the cigarettes business.

“Expect EBIT CAGR for the cigarette business at -3.3 per cent in FY2 6E-28E due tax increase,” said Elara Capital analysts in a recent note.

HUL’s exceptional gain

Hindustan Unilever Ltd (HUL) on Thursday reported a consolidated net profit of Rs 6,607 crore for the October-December quarter of FY26, up 121 per cent from the previous year.

The number includes a one-time gain of Rs 4,516 crore from operations discontinued after demerger with its ice-cream business.

Excluding exceptional items, profit after tax grew 1 per cent to Rs 2,562 crore.

HUL reported a one-time exceptional cost of Rs 113 crore due to the implementation of new labour codes.

The stock slipped nearly 3 per cent on the NSE following the development to hit an intra-day low of Rs 2,383.10 levels.

Remain selective

Gaurang Shah, head investment strategist at Geojit Investments, is bullish on select FMCG stocks on the back of a likely improvement in semi-urban and rural demand.

Profit margins of companies should improve as input cost pressures ease.

However, they should check advertising and promotional expenses and discounts.

Remain positive on Britannia, Nestle, Hindustan Unilever (HUL), ITC, Godrej Consumer, Tata Consumer, Dabur and Marico.

Expect 12-15 per cent upside in these stocks in the remaining part of 2026, he said.

Investors are selective about FMCG stocks

Investors are selective about FMCG stocks and buy only where there is earnings visibility, said Ambareesh Baliga, an independent market expert.

Over the next two or three quarters, urban and rural demand is likely to pick up.

That apart, management commentary during Q3 FY26 numbers has not been too bad.

Among the lot, Dabur, Emami and Marico look good for 18-20 per cent upside from here in the remaining part of 2026, provided the economic growth remains supportive.

ITC is a contrarian buy at the current levels, he said.