FMCG Stocks Outlook: Positive; to take cues from broad market

[B. Karthick]

FMCG Stocks Outlook: Positive; to take cues from broad market
Saturday, Aug 30

Shares of fast-moving consumer goods companies are expected to
take cues from the broad market next week, even as sentiment is
positive for the sector.
FMCG stocks are a good defensive bet in a volatile market. If the
market is up by 2-3% next week, FMCG shares may under perform, but if
there is some correction due to profit sales, then FMCG will buck the
trend.
FMCG shares may also find support from the lower-than-expected
inflation rate reported Thursday.
For the first time in 28 weeks, inflation for the week to Aug 16
fell to 12.40% from 12.63% for the previous week.
As inflation data boosted sentiment, Bombay Stock Exchange's FMCG
Index ended up 2.4% over previous week at 2,215.60 points.
Frontline shares like Hindustan Unilever and ITC look more
attractive for trading.
Hindustan Unilever is expected to extend its gains next week as
well, while Dabur, which was one of the major gainers this week, is
likely to remain flat.
ITC is seen as a good short-term buy.
ITC has shown an increase in rollovers on the first day of
September (futures) contracts as compared to the first day last month
(August).
Shares of Gillette India will also be in focus after it reported
"disappointing" fourth quarter results.
Gillette India, which follows a Jul-Jun financial year, said its
Apr-Jun net profit stood at 196.8 mln rupees, up 15.3% on year, and
net sales recorded were 1.66 bln rupees, up nearly 10%.
The earnings, however, include a one-time gain of 144.50 mln
rupees, which is profit from sale of property, the company said in a
notice to BSE.
Excluding the one-time gain, net profit rose just 4.3%, which is
very disappointing.
Parent Procter & Gamble said it will report its audited results
for the year ended June by end-Sep.

The report, which is based on a survey of nine "key" companies in
the FMCG sector, said most FMCG companies are confident of passing
price hikes on to consumers without "any adverse effect" on volumes or
sales growth.
Hindustan Unilever, Dabur, Britannia, Godrej Consumer and ITC are
among the companies that have raised product prices in a bid to offset
the impact of rising inflation on input costs.
A majority of companies feel that current input cost inflation
could continue and would have an unfavourable impact on business.
Price hikes are expected to offset over 40% of the cost inflation,
while cost saving is likely to offset less than 40%.
However, Hindustan Unilever and Godrej Consumer will benefit most
from the 30% decline in palm oil prices over the last three months.

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

Company Aug 29 Aug 22 Change Resistance*
Support*
(next week)
(next week)

Hind Unilever 245.40 244.90 0.2% 248
241
ITC 188.70 182.20 3.6% 192
184
Colgate-Palmolive 409.55 416.10 (-)1.6% 417
406
Dabur 91.45 89.40 2.3% 92.5
90
Marico 60.25 60.25 0.0% 62
59

BSE FMCG Index 2215.60 2163.54 2.4%
Nifty 4360.00 4327.45 0.7%
Sensex 14564.53 14401.49 1.1%

End

B.Karthick
Research Analyst.