FMCG Stocks Outlook: Range-bound next wk; ITC seen defensive bet

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B. Karthick

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Aug 23, 2008, 3:48:16 AM8/23/08
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FMCG Stocks Outlook: Range-bound next wk; ITC seen defensive bet
Saturday, Aug 23

Most fast-moving consumer goods companies' shares are expected
to move in a narrow range, and will remain defensive as overall market
takes cues from global markets, and August derivatives expiry due
Thursday.
In FMCG pack, ITC and Marico are seen as good defensive bets,
while Hindustan Unilever may witness profit sales after its recent
gains.
Broadly FMCG stocks will remain range-bound amid lack of adequate
triggers, though a fall in inflation or major decline in global crude
oil prices may help lift sentiments.
Inflation for week ended Aug 9 was 12.63% compared with 12.44% a
week ago.
Global crude oil prices have come off their peak of $147.27 a
barrel on Jul 11.
Benchmark September contract recently tested a low of $110, before
rising again. Friday's benchmark NYMEX September contract was at
$118.20 a barrel.
Crude oil prices influence prices of petroleum derivatives, which
are
major inputs for soaps, shampoos, and detergents among others. It also
influences fuel prices, another key cost for FMCG firms.
A good trigger for FMCG stocks will be news of any price hikes or
else a growth in earnings.
A combination of price increases and moderate volume growth will
drive top line growth of FMCG companies, but margins will remain under
pressure due to high input costs.

SHARES IN FOCUS
ITC, Hindustan Unilever, Godrej Consumer, Dabur and Procter &
Gamble will be the stocks in focus next week.
Though technically we expect Godrej Consumer and Dabur to remain
flat, fundamentally we feel likely triggers could be any price hikes
announced by the companies.
The management of both these companies had stated their intent to
raise product prices in Jul-Sep.
ITC, too, will be in focus ahead of an impending price hike on
Bristol
and Gold Flake Premium cigarettes.
Distributors had earlier told that price hikes would come into
effect end-August or early September.
Procter & Gamble will be in focus due to its results due Aug 29,
and amid hopes the company may announce a share buyback, which would
lend major support to the stock.
Hindustan Unilever may witness profit sales after gaining 2.2% in
the
past week. However, technically we are very bullish on the stock.
In comparison, BSE's FMCG Index was down 1.4% from previous week
at 2,163.54 points.
Sensex ended at 14,401.49, down 2.2% over previous week's close,
and Nifty ended down 2.3% at 4,327.45.

Following are the closing prices of most liquid FMCG shares, on
NSE Friday, compared with a week ago:

Company Aug 22 Aug 14 Change Resistance*
Support*
(next week)
(next week)

Hind Unilever 244.90 239.65 2.2% 252-265
236-224
ITC 182.20 191.15 (-)4.7% 192-195
181-175
Colgate-Palmolive 416.10 421.85 (-)1.4% 421-434
402-410
Dabur 89.40 91.00 (-)1.7% 95-97
85-86
Marico 60.25 62.70 (-)3.9% 65-69
58-53

BSE FMCG Index 2163.54 2193.58 (-)1.4%
Nifty 4327.45 4430.70 (-)2.3%
Sensex 14401.49 14724.18 (-)2.2%

B.Karthick
Research Analyst.
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