FMCG
Stocks Outlook for the week – 05 to 09.01.2015
( www.rupeedesk.in )
After consolidating in the past two weeks, stocks of fast-moving
consumer goods companies are seen trading with a positive bias as a fall in input costs and
improved demand are likely to provide underlying support. FMCG stocks have witnessed long
liquidation and remained under pressure but a rebound is likely in the coming week.
Input cost moderation across a wide category of inputs led by a sharp
drop in crude oil prices has emerged as a key earnings tailwind for most FMCG companies.
Quarterly average prices for Q3 (Oct-Dec) indicate around 5-25% deflation QoQ (quarter-on-quarter)
across key inputs. The upbeat broader market outlook is also seen supporting the sector.
Stock indices may trade with a positive bias next week with market
participants pinning hopes for some concrete announcements from the two-day banking conclave
'Gyan Sangam' that concludes on Saturday. In the current week, the BSE FMCG Index rose
1.2% but it was lower than the 2.4% increase in Nifty and Sensex. Hence, there is room for
FMCG stocks to gain in the next few days.
Gains in the FMCG sector were limited this week and so even if Nifty
witnesses some correction, FMCG companies are set to rise. Healthy volume growth,
improved product mix, and a rise in gross margin due to premiumisation and eventually lower
advertising and promotion spend-to-sales ratio will work in favour of Colgate
Palmolive. Dabur India and Tata Global Beverages are also expected to rise next week. Though
heavyweights such as ITC and Hindustan Unilever are seen trading on a positive note, the upside is likely
to be limited.
The FMCG market in India is likely to return to a double-digit growth
trajectory in 2015 and 2016 due to improved consumer sentiment and positive macroeconomic factors.
