Nestlé India Faces Stock Dip Following BofA Rating Downgrade
Nestlé India shares fell nearly 4% following a downgrade from Bank of America (BofA) Securities, which shifted its rating on the FMCG major from “buy” to “neutral” and revised the target price downward from ₹2,700 to ₹2,600. The valuation adjustment comes amid concerns about slower growth in key product categories.
BofA cited weaker-than-expected volume growth, particularly in the foods and Maggi portfolios, as a core reason for the downgrade. “Volume trajectory is likely to stay lackluster in the near term,” the brokerage noted in its report, reflecting continued softness in demand across the staples category and heightened competitive pressure in noodles and snacking products.
With inflation softening and rural demand still recovering, other major FMCG players such as HUL and ITC have benefited from a more favorable environment. However, Nestlé India’s premium portfolio and heavy reliance on urban markets appear to have limited its capacity to fully capture the broader demand revival.
The downgrade by BofA aligns with recent concerns raised by analysts around Nestlé India’s subdued volume performance despite aggressive marketing and distribution efforts. While the company remains a category leader in instant noodles, dairy, and cereals, increased competition and changing consumption patterns have weighed on volume-led growth.
In Q1 2024, Nestlé India had reported a modest single-digit year-on-year revenue growth, supported largely by price realization rather than volume expansion — a trend that BofA expects to continue in the short term. “Near-term earnings upside appears limited,” the report added.
Despite the current pressure, the long-term outlook for Nestlé India remains stable, supported by its strong brand equity, investments in capacity expansion, and innovation in health and nutrition segments. However, market watchers suggest the company will need to accelerate volume recovery and tap into rural consumption more effectively to maintain its growth trajectory amid shifting competitive dynamics in India’s ₹5 lakh crore FMCG market.
At market close on the day of the downgrade, Nestlé India shares traded at ₹2,443, reflecting investor caution following the revised outlook.