Nifty FMCG Index Rises 4% After Income Tax Cuts, led by ITC, Trent, and Godrej Consumer

The Nifty FMCG Index surged 4% in today’s trade following Finance Minister Nirmala Sitharaman’s announcement of no income tax up to ₹12 lakh in the Union Budget 2025. The tax relief is expected to boost disposable income, driving consumer demand for fast-moving consumer goods.

 ITC, Trent, and Godrej Consumer FMCG Stocks Lead Market Rally

At 1 pm, the Nifty FMCG Index was up 4%, marking its biggest one-day gain in 7 months. The rally was led by ITC, Trent, and Godrej Consumer Products, each rising 7%. Other stocks, including Varun Beverages and Hindustan Unilever, recorded gains of up to 4%. The broader consumption sector also benefitted, with auto and retail stocks such as Maruti Suzuki and Kalyan Jewellers seeing strong buying interest.

Market Reaction to Tax Reforms

The Finance Minister highlighted that the new tax regime aims to simplify the structure while benefiting the middle class. Market participants reacted positively to the announcement, as the increase in disposable income is expected to boost consumer spending. Experts noted that the FMCG sector had been struggling with sluggish demand and slow volume growth in recent quarters, and the tax cut is likely to provide much-needed relief.

Nifty FMCG Index Composition and Key Stocks

The Nifty FMCG Index tracks the performance of 15 fast-moving consumer goods companies listed on the National Stock Exchange. It is calculated using the free-float market capitalisation method and is rebalanced semi-annually.

The largest constituents of the index by weightage are:

• ITC Ltd – 30.71%
• Hindustan Unilever Ltd – 20.15%
• Nestlé India Ltd – 7.62%
• Varun Beverages Ltd – 6.61%
• Tata Consumer Products Ltd – 6.13%
• Britannia Industries Ltd – 5.56%
• Godrej Consumer Products Ltd – 3.88%

Impact of Budget Measures on Consumer Demand

Market analysts highlighted that consumer spending had been weak due to high inflation, which affected sales growth in the mass-market segment, particularly in urban areas. The Budget’s focus on increasing disposable income and simplifying tax structures is expected to improve purchasing power.

According to projections, a 5–7% rise in disposable income for middle-income households could lead to a 6% increase in consumer spending on essential goods, contributing to a 0.7% boost in GDP growth.

Valuation

As of 31 January 2025, the Nifty FMCG Index had a price-to-earnings ratio of 45.98, a price-to-book ratio of 1.82, and a dividend yield of 11.23%. The index is scheduled for its next rebalancing in July 2025.

With the tax relief set to enhance consumer demand, market participants will closely monitor FMCG stocks in the coming sessions to assess the impact on sales growth and earnings in the next quarter.