Indian Consumer Stocks Stand Out as Poll Results Spur Selloff

(Bloomberg) -- Shares of consumer goods companies emerged as a bright spot in India even as local stocks tumbled following election results that showed a much tighter outcome for Prime Minister Narendra Modi’s party.

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The Nifty FMCG Index, climbed as much as 1.3% on Tuesday, making it the only sectoral gauge to rise. In contrast, the benchmark NSE Nifty 50 dropped as much as 8.5%, it’s biggest intraday dip since March 2020.

A weak government may be forced to appease the electorate and ramp up welfare spending, a move which may spur consumer demand in the economy. That’s probably boosted stocks from the sector, with Hindustan Unilever Ltd., rising over 6% and liquor-maker United Spirits Ltd. advancing 4.6%.

READ: India’s Markets Tumble as Election Much Tighter Than Forecast

“There is now a fear that the new government would turn more welfarist and less reformist,” said V K Vijayakumar, chief investment strategist at Geojit Financial Services. That’s has triggered a flight to these defensive plays, he said.

Nestle India Ltd. jumped as much as 3.2%, while Colgate-Palmolive India rose 4.9%. Retailers Avenue Supermarts Ltd. and V-Mart Retail Ltd. also gained.

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