FMCG Stocks Outlook for the week – 08 to 12.06.2015
(Range
bound with negative bias, regulatory issues)
Stocks
of fast-moving consumer goods companies are likely to trade range bound with a
negative bias next week amid concerns over weak monsoon and processed food
products coming under regulatory scanner.
The
controversy surrounding the safety tests of Nestle India's Maggi noodles
remained the talk of the town, with the company finally deciding to withdraw
the product from the market, while still maintaining that it was safe for
consumption.
Despite
the assurance from the global and Indian top brass of Nestle, Food Safety and
Standards Authority of India asked the company to submit a compliance report
regarding Maggi noodles within three days and to withdraw all nine variants of
the product sold in India. Concerns over Maggi noodles' safety propped up after
Uttar Pradesh food safety regulator found higher-than-permissible limit of lead
content and presence of monosodium glutamate in the product.
The
overall sentiment for Nestle remains weak but the stock may see some minor
corrective upmoves next week. Owing to the Maggi issue, instant noodles brands
of ITC and Hindustan Unilever, among others, have also come under the
government scanner. The Delhi government has asked the food regulator to test
samples of all instant noodles brands.
The
southwest monsoon hit Kerala, four days later than normal. The India
Meteorological
Department
has cut is forecast of India's monsoon rains this season to 88% of the long
period
average
from 93% earlier. Weak rainfall forecast has raised concerns over rural demand
for FMCG products and hence is weighing on the sentiment. The trend in FMCG
stocks in the coming week will depend on the advance of the monsoon in the
South Indian states.
