Hindustan Unilever (HUL) shares gained for the second straight session on Tuesday, February 25, 2025, reflecting a recovery in broader market trends. Despite this, the FMCG giant has experienced a significant decline, losing 26% from its all-time high of ₹3,034.5 per share recorded on September 23, 2024. This fall mirrors the broader slump in FMCG stocks, with the Nifty FMCG index also dropping over 21% in the same period.
Amid ongoing inflation concerns and rising input costs, the weightage of Nifty FMCG in the broader Nifty50 index has plunged to 9.5%, its lowest level since 2011. As HUL attempts to recover, analysts remain divided on whether this slump is a temporary phase or signals a long-term shift in market trends.
Key Highlights:
HUL Stock Rebounds but Faces Continued Pressure:
Hindustan Unilever’s stock saw a mild recovery on February 25, gaining 0.76% or ₹17.05 to close at ₹2,259.25 on the BSE. However, this comes after a sharp five-day losing streak on the NSE, where the stock had shed nearly 4%.
More concerning is the fact that HUL ended in the green in only three of the eighteen trading sessions in February, signaling persistent weakness. The broader Nifty FMCG index has similarly underperformed, with a staggering 20.2% decline since September 2024—outpacing the Nifty 50’s 12.6% drop in the same period.
According to Rajesh Sinha, Senior Research Analyst at Bonanza Portfolio, this underperformance marks the first time in two decades that FMCG stocks have failed to act as defensive assets in a weak market.
What’s Causing the FMCG Stock Downturn?
Several factors have contributed to the downturn in HUL and other FMCG stocks:
1. Rising Input Costs and Weak Demand:
FMCG companies, including HUL, have struggled with higher raw material costs, squeezing profit margins. Additionally, demand in rural and urban markets has softened due to inflation and cautious consumer spending.
2. Market Response to Budget 2025:
Although Budget 2025 introduced income tax cuts and RBI’s interest rate reductions, the rally was short-lived. Persistent inflation concerns have dampened investor sentiment in the FMCG sector.
3. Declining Nifty FMCG Weightage:
Once considered a stable sector, FMCG’s influence in Nifty50 has plummeted to 9.5%, its lowest in over a decade. This signals a potential shift in market dynamics as investors favor other growth sectors.
HUL Q3 Earnings: A Silver Lining?
Despite the ongoing stock decline, HUL’s Q3 earnings provided some relief:
- Net Profit: ₹3,001 crore (+19% YoY), exceeding expectations.
- Revenue: ₹15,195 crore (+2% YoY), slightly below the previous quarter’s ₹15,319 crore.
The company’s strong profit growth suggests resilience despite market pressures. Analysts believe that HUL’s premiumization strategy and strategic acquisitions could drive long-term recovery.
What Analysts Say: Will HUL Stock Recover?
BoB Capital Markets:
- Reiterated a “Buy” rating on HUL shares.
- Set a target price of ₹2,859 based on long-term growth potential in premium categories and rural demand recovery.
KR Choksey:
- Maintained an “Accumulate” rating.
- Set a target price of ₹2,610, citing strategic acquisitions and pricing power as key growth drivers.
Should Investors Bet on HUL’s Recovery?
Hindustan Unilever’s stock remains significantly down from its peak, reflecting broader FMCG sector struggles. However, its strong earnings, premiumization efforts, and expert endorsements suggest a potential long-term rebound.
Investors should weigh the short-term headwinds against HUL’s long-term fundamentals before making decisions. While the stock remains under pressure, it may present a buying opportunity for those confident in a sector-wide recovery.
Do you think HUL’s share price will bounce back? Share your thoughts in the comments below!
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