ITC, Varun Beverages, other FMCG stocks slide up to 4% on profit-taking, snap 5-day rally after GST 2.0 boost

Shares of India’s consumer goods majors slipped on Friday as investors booked profits following a weeklong rally sparked by the government’s overhaul of Goods and Services Tax (GST) rates. ITC, Varun Beverages and several peers lost as much as 4%, pulling the Nifty FMCG index lower and halting five straight sessions of gains.

Varun Beverages led sectoral losses, tumbling nearly 4% to Rs 470.55 on the BSE. ITC dropped close to 3% to Rs 404.40, while Emami shed 3% and Colgate Palmolive (India) declined 2.5%. Patanjali Foods, Dabur India, Hindustan Unilever, Godrej Consumer Products and Nestle India were down as much as 1.5%.

The Nifty FMCG index slid about 2%, erasing a portion of the 3% advance it had logged over the past five sessions after GST Council reforms buoyed sentiment.

Profit-taking halts momentum

The pullback mirrored broader market weakness, with the Sensex giving up early gains of 318.55 points to trade at 80,353, down 700 points from its day’s high. The Nifty slipped to 24,633 after briefly crossing 24,700. Market experts attributed the reversal to profit-booking across sectors after the initial enthusiasm over GST reforms faded.

“The initial enthusiasm witnessed in the market yesterday couldn’t be sustained,” said Dr. V.K. Vijayakumar, Chief Investment Strategist at Geojit Investments, noting that markets had “partly discounted the GST reforms” and that elevated valuations, along with geopolitical and tariff-related risks, gave bears room to build short positions.

GST rationalisation spurs early gains

The GST Council on Wednesday approved a rationalisation of tax slabs to 5% and 18%, effective September 22, reducing levies on staples such as food products, personal care items, ice creams and consumer durables.

The move had triggered a rally in FMCG and consumer discretionary stocks earlier in the week, with expectations that lower prices would stimulate consumption.

Outlook: dips seen as buying opportunity

Market watchers said the sell-off may prove short-lived. Rahul Shah of Motilal Oswal Financial Services, speaking to ET Now, argued that reforms should be seen as “growth-driven, not just tax relief,” adding that the downside in equities is likely limited.

“We believe the government is realising this and has been taking steps to revive consumerism in the country,” he said, highlighting opportunities in FMCG, autos and consumer discretionary companies.

Vijayakumar also suggested that weakness is more pronounced in expensive mid-cap and small-cap counters, while large-caps with reasonable valuations are showing resilience, a “healthy trend” that could persist.

Also read | Mahindra & Mahindra is GST 2.0’s biggest auto winner. 5 reasons why

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)