GOLDEN RULES FOR TRADING

FMCG Stocks Outlook for the week - 01 to 05.07.2013

rupeedesk.in

We believe the recent fall in prices of fast-moving consumer goods companies' stocks will provide a good buying opportunity over the next two weeks. We have seen in the recent fall that stocks of FMCG companies like ITC and Colgate Palmolive have fallen almost 10-20% from their 52-week highs. These are companies that have well-established business models, excellent brand value and well-established distribution networks. At current prices, their stocks are a quality investment. Currently companies like Colgate Palmolive (India) are spending more on advertising to build new categories and hence margins are under pressure. However, we believe the expenses incurred on advertising should be looked at as investment in the brand, which will "bear fruit for many years ahead".We will also keep an eye on Hindustan Unilever, as the ongoing open offer by the company's parent Unilever Plc to buy stocks at 600 rupees a share ends on Jul 4. We believe that the stocks of the company may fall about 12-15% on the day the open offer ends. We expect that bullish on most FMCG counters.