FMCG Stocks Outlook for the week - 22.07.2013 to 26.07.2013

Stocks of fast-moving consumer goods companies are seen inching up next week we believe they are increasingly being valued on the basis of corporate actions rather than fundamentals. This week, shares of India's largest consumer goods company Hindustan Unilever Ltd touched a life-high of 719.10 rupees, as the company raised prices on certain premium products and a rebalancing in the FTSE Index increased the weight given to the stock.

In the FTSE's all world index and all emerging index, the company's weight will increase to 33% from 24% from Monday. We are in a scenario where investors are completely ignoring the ground realities and only calculating how much multinationals will pay to buy shares of their Indian counterparts or home-grown FMCG companies, stocks of some FMCG companies are trading in bubble territory.

Hindustan Unilever, which is scheduled to announce its results on Jul 26, is expected to post a profit of 8.62 bln rupees for Apr-Jun, down 35% on-year. The decline in profit is on account of an exceptional gain of 6 bln rupees in the same quarter last year following sale of property. The company's sales during Apr-Jun are expected to rise 12% to 70.18 bln rupees, driven by a volume growth of 4%.