Stocks of fast moving consumer goods companies are likely to post
gains in the next few sessions. We believe investors will buy these stocks, as their
earnings are likely to be relatively stable in an increasingly volatile market. We have seen
stocks in rate sensitive sectors correct significantly over the last few weeks. FMCG stocks
do not have this kind of risk and hence investors will increasingly favour stocks in
this sector that are defensive in nature and provide much needed stability to portfolios.
We are of the opinion that mid-sized FMCG companies are trading at
attractive valuations; and these stocks are good buys at current prices,
given that they have robust business models and the ability to grow even in adverse market
conditions.
Despite tough market conditions, FMCG stocks have been amongst the
very few wealth creators in the market, even now we recommend Dabur that is
trading at about 26 times two-year forward earnings. Marico that is
trading at 22 times two-year forward (earnings) is also an excellent buy. We are also negative
on tobacco-major ITC and expect the stock to fall to 311 rupees in the next few
sessions.
