Should You Go Overweight on FMCG? Here’s What the Charts and Analysts Say

The fast moving consumer goods sector might continue to hold on to investors’ confidence defying data points that suggest a correction in some of the constituents of the sectoral index. The Nifty FMCG index is expected to continue to outperform the benchmark index, JM Financial said in a report on Tuesday. “Any further underperformance from hereon should be used to go overweight on sector,” the brokerage firm added.

April was the second consecutive month for the sectoral index in which it closed in green extending the gains recorded in the month of March. The index has gained over 11% in the two months—March and April. To that effect, strength in the index is expected to prevail as the index has been trading above the 200-day exponential moving average (EMA) for the eight consecutive sessions.

The 200-day EMA levels have acted as a strong support and resistance zone for the index in the last one year, according to JM Financial. The level acted as support during March, April and June last year, while resistance level was observed during November last year and January this year. 

Investor sentiment turned favourable towards companies that are more domestically focused amid increasing global trade tensions, along with interest rate cuts by the RBI, and consumption stimulus measures announced in the Union Budget for FY26. The consumer goods stocks saw heavy selling pressure between October and February due to rising input costs, falling volumes, and weak urban demand.

Historical Trend

Apart from this, the index also has a favourable seasonal factor as the period from May to August has historically proven well for this sector. In the last 10 years, the Nifty FMCG index has closed in green on eight occasions each in May and June, with an average up-move of 3% and 2% respectively, according to the brokerage firm.

On the other hand, the index has closed in green on seven occasions each in July and August and this time also the average up-move was 3% and 2%, respectively. Overall, the sectoral index has given an average return of up to 10% in the months May-August, outperforming the headline Nifty index.

Nifty FMCG-to-Nifty Ratio

The Nifty FMCG-to-Nifty ratio has dipped from a high of 2.6 level in September 2024 to 2.32, JM Financial said. It touched its year-low in March at 2.24. The ratio level of 2.37 could act as an immediate resistance, above which it might move towards 2.48 and 2.6 levels, the brokerage firm said.

Immediate resistance is placed at 58900 levels, above which the index has potential to test an all-time high level of 66438. Support in the index is placed at 54700 levels, coinciding with its 50-day EMA and the previous support zone.

Stock by Stock

None of the stocks that have significantly outperformed in 2025 so far are among the top two weighted constituents of the sectoral index. While Tata Consumer delivered the highest 28% returns in the said period, it makes up for the fourth highest weight in the index. Nestle India, which gave an 8% return, has the third highest weightage.

Hindustan Unilever, on the other hand, has the second highest weightage but has eked only 1% return in 2025 so far, meanwhile, Varun Beverages and ITC have declined by 16% and 2%, respectively. ITC has the highest weightage in the sectoral index.

Other than technical triggers, some fundamental factors are also expected to aid the sector, such as IMD’s expectation of better than usual monsoon this year, better than expected wheat crop, easing crude oil prices, and hope of a gradual recovery in demand on the back of lower food inflation, interest rate cuts, and tax rebates.

Recently, global brokerage firm, UBS also shared its optimism on the sector, upgrading some names in the consumer space. Looking ahead, the firm expects Colgate, Trent, HUL and ITC to post a strong rebound in the current financial year.

The cyclical headwinds are expected to recede in FY26, UBS said, adding that the growth in their earnings is also expected to turn around and continue recovering in FY27. The brokerage firm had then stated that valuations were back in a reasonable range, as the market has already priced in the effect of weak demand and high input costs on the FMCG companies’ margins.