Mumbai, April 13 (NationPress) Fast-Moving Consumer Goods (FMCG) stocks, also known as consumer staples, are currently strategically positioned for investors in light of soaring crude oil prices and increasing geopolitical uncertainties, even though analysts have noted a weakened near-term outlook for the sector, according to a report published on Monday.

A report from BNP Paribas India indicates that the prospects for Indian consumer staples have deteriorated due to the recent surge in oil prices, which has been exacerbated by tensions in West Asia.

It is anticipated that higher crude prices will lead to increased input costs and compress margins in the short term.

Nevertheless, the brokerage pointed out that consumer staples have historically shown resilience during oil price shocks, as witnessed in 2008, 2011, and 2022, with earnings cuts being comparatively smaller than in other sectors.

"Despite the bleak outlook, these stocks have been disproportionately affected and are now trading at valuations reminiscent of a decade ago, presenting greater appeal for investors," the report stated.

The sector, previously viewed as a recovery play for earnings in FY27, is now perceived primarily as a defensive investment amidst the risks posed by high energy costs and global uncertainty.

In the short term, the March quarter (4Q FY26) is expected to show the effects of improved domestic consumption, with analysts forecasting double-digit year-on-year EBITDA growth, marking the first such increase in almost ten quarters.

However, rising commodity prices, particularly those linked to crude such as palm oil and polymers, are likely to pressure margins starting in the first half of FY27.

The report also suggested that companies may pass on some of these costs to consumers through price increases.

Additionally, crude prices surged significantly towards the end of the March quarter, with sequential increases of around 24%, raising costs for essential raw materials.

While a ceasefire has mitigated the risk of dramatic spikes in oil prices, analysts warned that persistently high crude prices could adversely affect both demand and profitability.

According to brokerage analysts, earnings for FY27 and FY28 have been revised downward across the sector, now falling below consensus expectations, reflecting the impact of increased raw material costs and currency fluctuations.

Despite these challenges, consumer staples are projected to remain relatively resilient compared to other sectors, especially if oil prices remain high, as their defensive nature tends to draw investors during tumultuous market periods, according to analysts.

Since the onset of the conflict, the Nifty FMCG index has dropped by up to 5.76 percent, or 2,948 points, reaching 48,194 between February 27 and April 10.

Moreover, the index traded at 47,291, hitting an intraday low, which represents a decline of about 2 percent, or 900 points, on the NSE.