FMCG Stock Outlook for the week – 14 to 18.12.2015
(Seen
in range, bias positive; winter demand key)
Shares
of fast-moving consumer goods companies in the coming week are
expected
to trade in a range with a positive bias as the onset of winter may lift
demand
for cold creams and health supplements.
We
expect that there were concerns over demand for winter products because
in
most parts of the country winter did not set in till the first week of
December.
This could have hit demand for cold creams and skincare products
as
well as health supplements like Chyawanprash. Now that temperatures have
dipped,
demand for these products has started to pick up which will augur well
for
companies like Hindustan Unilever Ltd, Marico Ltd and Dabur India Ltd.
Also,
broad market is seen upbeat to start with next week after the industrial
output
numbers, announced after market hours today, surprised on the upside.
India's
industrial output in October came at 9.8%, compared with a negative
2.7%
a year ago and significantly above expectations of 8.0%.
Also,
there are expectations that the goods and services tax bill may be passed
next
during the winter session of Parliament if the ruling National Democratic
Alliance
manages to convince the Congress party. Implementation of GST is
seen
positive for consumer goods manufacturers and if the bill is passed, shares
of
these companies may see some upside.
However,
ITC shares may come under further pressure as the bill has proposed
very
high rates for cigarettes. A committee headed by the Chief Economic
Advisor
Arvind Subramanian has made a recommendation that if a single GST
rate
cannot be implemented, then a three-tier tax structure should be
implemented
with a low rate of 12% for essential items. The committee also
recommended
that a standard rate of 17-18% should be implemented for most
goods
and all services.
Demand
has been a major concern for FMCG companies in the last few
quarters--rural
demand has taken a hit, but urban demand has seen a slight
improvement--which has provided for some relief.