The latest report from JM Financial Institutional Securities sheds light on the FMCG sector's underperformance driven by a lack of concrete evidence of rural demand pickup. Here's a breakdown of the key insights:

1. FMCG Sector Underperformance:

   • Corporate commentary in the last quarter lacked evidence of a pickup in rural demand, leading to the FMCG sector's underperformance across various time frames over the past year.

2. 2024 Outlook:

   • While risk-on sentiments prevail, JM Financial anticipates 2024 to favor large caps over SMID. Asset allocators are expected to prioritize valuation comfort, potentially impacting sectoral performance.

3. Sectoral Performance:

   • Notable outperformance was observed in utilities (13.5%), energy (13.4%), and pharma (10.2%), while the FMCG sector consistently underperformed the benchmark.

4. Q3 FY24 Performance:

   • 66% of companies in JMFL's coverage universe either met or beat expectations in Q3 FY24. However, revenue growth missed estimates by 2.3%, indicating challenges in top-line expansion.
   • EBITDA margin of 17.5% exceeded expectations but tapered sequentially from 18.7% in Q2FY24.

5. Sectoral Margin Performance:

   • Margins exceeded expectations in sectors like ports, metals, oil & gas, and utilities. However, chemicals and media sectors missed expectations.

6. Market Performance:

   • Emerging market equities gained 4.7% in the last month, outperforming the Nifty (2.9%) by a wide margin.
   • The entire commodity basket reverted with a gain of 3.2%, while crude prices rose by 5.1%.

In summary, the report highlights the challenges faced by the FMCG sector due to the absence of rural demand pickup and provides insights into broader market trends and sectoral performance.