Varun Beverages, ITC, Emami Share Price Slips, Nifty FMCG Erases Post GST Rally Gains- Know What Investors Should Do

Fast Moving Consumer Goods (FMCG) stocks witnessed strong gains on September 4 on the back of the GST reforms. However, on September 5 FMCG stocks witnessed broadbased selloffs with Varun Beverages share price falling nearly 3 per cent to trade at an early low of Rs 476.6 apiece on the NSE. Shares of Emami Ltd, ITC and Colgate Palmolive Ltd also came under selling pressure and traded lower by as much as 2.75 per cent at the time of writing.

Nifty FMCG Gives Up Gains

The Nifty FMCG index rallied ahead of the GST Council meeting and ended in the green for four consecutive sessions between September 1 and September 4. In its four session rally the index gained as much as 1.65 per cent. The Nifty FMCG also hit a high at 58,485.05 levels on September 4 boosted by the GST rate revision on select FMCG goods. However on September 5 the index shed the gains and has declined as much as 1.4 per cent to an intraday low at 56,290.6 levels, erasing the gains made in the previous session.

On September 5, as many as 12 constituents of the Nifty FMCG index traded in the red while three stocks traded in the green, at the time of writing. Shares of Emami Ltd led the losers among Nifty FMCG constituents, declining nearly 3 per cent to an intraday low of Rs 597.3 apiece on the NSE. Other major losers included Colgate Palmolive Ltd which declined over 2 per cent to trade at an intraday low of Rs 2412.3 apiece on the NSE. Shares of Varun Beverages Ltd traded at Rs 483.20 apiece on the NSE down by 1.29 per cent at the time of writing.

Nifty FMCG heavyweights such as ITC Ltd, Hindustan Unilever Ltd and Nestle India Ltd also traded lower by as much as 2.22 per cent at the time of writing. Shares of ITC fell more than 2 per cent to trade at an intraday low of Rs 406.05 apiece on the NSE. Shares of Hindustan Unilever Ltd declined nearly 1 per cent to trade at an early low of Rs 2645.8 apiece on the NSE.

Why Are FMCG Stocks Declining

On September 4, the Centre announced reduction in the GST rate imposed on several FMCG products such as hair oil, shampoo, toothpaste, toilet soap bar, tooth brushes, shaving cream, butter, ghee, cheese & dairy spreads and pre-packaged snacks. While the news triggered a rally in the FMCG stocks, the present decline has occurred due to a correction in the space and likely profit-booking by investors according to Harshal Dasani, Business Head, INVasset PMS.

“Today’s decline in FMCG is more a case of expiry-related volatility and profit-booking after a steady four-day rally than any change in fundamentals. For long-term investors, the thesis remains intact. Rural demand is showing early signs of recovery, supported by kharif sowing progress and easing food inflation, while urban demand remains firm,” Dasani said.

Additionally the introduction of the 40 per cent tax-slab for sin-goods has also affected select FMCG stocks such as Varun Beverages which extended declines on September 5. The stock came under selling pressure as aerated and energy drinks are now in the highest GST bracket.

Dasani added that the FMCG space witnessed declines today, additionally volatility is expected to persist in the FMCG space in the near-term. However the long-term outlook for the sector is likely to be resilient amid multiple tailwinds such as rising per-capita incomes, premiumisation in urban markets, and greater penetration in semi-urban and rural India.

“The Nifty FMCG index lost 1 per cent today, snapping a winning streak largely due to profit-taking. Near term, some volatility may persist as traders rebalance ahead of commodity price updates and festive demand data. Structurally, however, FMCG remains one of the most resilient sectors. Long-term outlook is supported by rising per-capita incomes, premiumisation in urban markets, and greater penetration in semi-urban and rural India,” Dasani said.

Which Strategies Can Investors Deploy In The FMCG Space

Dasani said that existing investors should avoid reacting to short-term corrections and remain invested as the FMCG sector is expected to offer steady compounding and defensive stability.

“Existing investors should avoid reacting to short-term corrections and instead stay invested, as FMCG continues to offer steady compounding and defensive stability in portfolios. Input cost pressures have moderated with edible oil and crude derivatives stabilising, which should aid margin resilience. Importantly, the upcoming festive season — beginning with Ganpati and Navratri, followed by Diwali and the wedding cycle in H2 FY26 — is expected to drive sequential volume recovery,” Dasani said.

Dasani added that investors who wish to buy the dip in FMCG stocks can do so with a medium to long-term investment horizon. He added that investors should approach the space through gradual allocation rather than lump-sum buying to ride out volatility in the near-term.

“The present dip provides a good entry point for new investors with a medium to long-term horizon. With inflation moderating, rural recovery is slowly gaining traction, while urban demand is set to benefit from seasonal triggers like Diwali purchases. Investors should, however, approach this as a compounding story rather than a quick-return trade. Gradual allocation on declines is preferable to lump-sum buying, ensuring investors ride out volatility while capturing the sector’s defensive strength,” Dasani said.