FMCG Stocks Outlook for the week – 17 to 21.10.2016

FMCG Stocks Outlook for the week – 17 to 21.10.2016 )

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Stocks of fast moving consumer goods companies are seen falling for the fourth consecutive
week as input costs continue to soar. Spending in rural areas, which accounts for the bulk of
revenue for most FMCG companies, was still subdued.

We expect the companies to take price hikes with sequential increase in commodity prices
and lower gross margin expansion. Though most consumer goods companies expect sales
volume to pick up in the festival season, initial reports from retail channels suggest that sales
continued to remain subdued until last week.

Among major FMCG stocks, Hindustan Unilever Ltd is likely to fall to 820 rupees, HUL's
parent company, Unilever, has trimmed the growth outlook for its Indian arm for Jul-Sep due
to rising commodity prices. "In India, prices in skin cleansing increased in response to rising
commodity costs, dampening consumer demand for the category in the quarter,"
Unilever's investor relations head Andrew Stephen said at the company's post earnings
conference call on Thursday.

Stephen's comments are in line with HUL's Chief Financial Officer P.B. Balaji's warning that
the domestic unit might find it difficult to grow in terms of volume. The recent volume trends
have been a bit of a concern. They have been at a multi-year low in terms of volumes. In
the near term, we are seeing concern as the management had said during a conference call
after the announcement of the company's earnings for Apr-Jun. In the coming week, FMCG
companies are likely to start detailing their earnings for the September quarter.