FMCG Stocks Outlook for the week – 31.08.2015 to 04.09.2015
(FMCG
stocks are likely to rebound next week)
Shares
of fast moving consumer goods companies are likely to rebound next week, as
defensive
sectors
may continue to get some preference, given the vulnerable broader market
scenario.
In
line with the overall sharp drop in Indian share market this week mainly on
account of Chinese economic concerns, most FMCG stocks fell 1-9% and the CNX
FMCG Index declined 2.6%.
Though
the market sentiment remains weak, some recovery in FMCG stocks is expected in
the
coming
days. The FMCG Index can rebound to 20900-21100 levels in the near-term.
Technically, ITC, Godrej Consumer Products and Jyothy Laboratories are the top
picks in the consumer space.
ITC
has been consolidating and we expect it to break the range and rise above 335
rupees towards 360 rupees in the short term. It has support at 315 rupees.
Among the index-heavyweights ITC and Hindustan Unilever, there is likelihood of
investors shunning HUL.
HUL
could also see some rebound but its trend remains weak below the 900- rupee
level with major support at 810 rupees. A strong innovation funnel, focus on
improving distribution productivity and benefit flowing from softer commodity
prices place the company in a sweet spot.
On
the whole, fundamentals for the FMCG sector are mixed. While benign raw
materials are aiding gross margins of companies, increased competitive
intensity may lead to higher spend on advertising and promotions.
Also,
demand on the ground has not picked up much and monsoon has been weak so far
this season, which is a negative. Monsoon rainfall in India so far this season
that began on Jun 1 has been 12% below normal at 612.1 mm, according to the
latest data from the India Meteorological Department.
Market
participants will watch out for India's gross domestic product growth for
Apr-Jun, which will be released by the Central Statistics Office on Monday, for
more cues.
