The stocks of six leading fast-moving consumer goods (FMCG) companies have hit record highs in the past couple of weeks riding on good fourth quarter performances or on expectations that GST would bring them massive windfalls. HULBSE -0.48 %, ITCBSE 1.40 %, Britannia IndustriesBSE -0.32 %, Marico, Godrej Consumer ProductsBSE 1.73 % (GCPL) and P&G Hygiene and Healthcare have all recorded highs in this month.

Markets are largely bullish on consumer stocks underpinned by a demand pick-up in the offing due to GST, especially in rural India on the back of a normal monsoon forecast. However, there are four factors that have the potential to make or mar the companies’ performance going ahead.

SMOOTH TRANSITION TO A GST REGIME
The Goods and Services Tax (GST) is likely to ring in short-term disruption for the industry — the impact could be different for different companies. The June quarter performance will show the exact impact of the transition. HUL, for example, expects inventory pipeline correction of 100 to 250 bps in the current quarter ahead of the GST roll-out.

“While there will be disruption for around a month as the channel gets replenished with new inventory, improved efficiency in terms of logistics should add around 2% to the operating margin of FMCG companies this year,” said Ulhas Kamath, joint managing director of Jyothy LaboratoriesBSE 0.85 %. In the medium term, companies could benefit in product segments like tea and staple foods that have large unorganised players competing.

“We…