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Stocks of fast moving consumer goods companies are likely to remain range bound with a positive bias in the week ahead as investors are likely to buy on attractive valuations. The BSE FMCG Index fell over 8% this week, compared to a 3-3.5% fall in benchmark indices. Stocks of companies like ITC, Colgate Palmolive and Dabur fell between 7-10% as Colgate Palmolive and Tata Global Beverages disappointed the Street with their Apr-Jun earnings. Colgate India's operating profit margin declined by about 230 basis points year on year owing to higher advertising and promotional spends. Most analysts expected operating margin to contract by 40-50 basis points. Tata Global Beverages also disappointed investors as it reported a 5% year on year revenue growth for the June quarter, lower than analysts' estimates of 7%. This is a good opportunity for investors to pick up stocks of companies like ITC, Colgate and Dabur. While there is a fear of a slowdown in discretionary spends, with good monsoons and upcoming elections, we believe these fears largely outweigh the opportunities in the medium term.
Stocks of fast moving consumer goods companies are likely to remain range bound with a positive bias in the week ahead as investors are likely to buy on attractive valuations. The BSE FMCG Index fell over 8% this week, compared to a 3-3.5% fall in benchmark indices. Stocks of companies like ITC, Colgate Palmolive and Dabur fell between 7-10% as Colgate Palmolive and Tata Global Beverages disappointed the Street with their Apr-Jun earnings. Colgate India's operating profit margin declined by about 230 basis points year on year owing to higher advertising and promotional spends. Most analysts expected operating margin to contract by 40-50 basis points. Tata Global Beverages also disappointed investors as it reported a 5% year on year revenue growth for the June quarter, lower than analysts' estimates of 7%. This is a good opportunity for investors to pick up stocks of companies like ITC, Colgate and Dabur. While there is a fear of a slowdown in discretionary spends, with good monsoons and upcoming elections, we believe these fears largely outweigh the opportunities in the medium term.
