GOLDEN RULES FOR TRADING

FMCG Stocks Outlook for the week – 08 to 12.06.2015 (Range bound with negative bias, regulatory issues)

FMCG Stocks Outlook for the week – 08 to 12.06.2015
(Range bound with negative bias, regulatory issues)
Stocks of fast-moving consumer goods companies are likely to trade range bound with a negative bias next week amid concerns over weak monsoon and processed food products coming under regulatory scanner.

The controversy surrounding the safety tests of Nestle India's Maggi noodles remained the talk of the town, with the company finally deciding to withdraw the product from the market, while still maintaining that it was safe for consumption.

Despite the assurance from the global and Indian top brass of Nestle, Food Safety and Standards Authority of India asked the company to submit a compliance report regarding Maggi noodles within three days and to withdraw all nine variants of the product sold in India. Concerns over Maggi noodles' safety propped up after Uttar Pradesh food safety regulator found higher-than-permissible limit of lead content and presence of monosodium glutamate in the product.

The overall sentiment for Nestle remains weak but the stock may see some minor corrective upmoves next week. Owing to the Maggi issue, instant noodles brands of ITC and Hindustan Unilever, among others, have also come under the government scanner. The Delhi government has asked the food regulator to test samples of all instant noodles brands.

The southwest monsoon hit Kerala, four days later than normal. The India Meteorological
Department has cut is forecast of India's monsoon rains this season to 88% of the long period

average from 93% earlier. Weak rainfall forecast has raised concerns over rural demand for FMCG products and hence is weighing on the sentiment. The trend in FMCG stocks in the coming week will depend on the advance of the monsoon in the South Indian states.