FMCG Stocks Outlook
for the week – 06 to 09.09.2016
To rise more next
week on price hikes, monsoon
Stocks of fast moving consumer goods companies are seen
extending their gains next week on hopes
of above-normal monsoon rains in September and price hikes.
Though raw material costs have been
rising in the past few months, fresh spell of rains across
the country has heightened hopes of an
above-normal rainfall, which could cool off some raw
material prices. In the Jun-Sep monsoon season so far, India has received 709.6 mm rainfall. Though rains
have been 3% below the normal of 728.3 mm for the period, it is unlikely to affect stocks as the
deficit is manageable. Stocks of ITC and
Hindustan Unilever are expected to break out and touch fresh
highs during the week. Last week,
analysts maintained a positive stance on Britannia
Industries due to innovation-led growth and
product launches. We remain overweight to neutral on pure
play defensives as secular earnings
coupled with sector rotation could lead to consolidation in
near term valuations and offer stockspecific opportunities. Despite some hardening in menthe oil prices,
input prices have largely been benign. Further, price hikes (2.0-2.5% in FY17) and a better
mix could help counter the higher ad spends
and maintain the present margin.
