FMCG scrips March ahead

Over the past week, FMCG stocks have witnessed an upward trend. FMCG companies are expected to post good sales numbers and the stocks in the sector are being considered defensive, going forward.

On Friday, Godrej Consumer Products (GCPL) gained on the back of the proposal of a stock split and expansion plans in the soap business. Other gainers were Procter & Gamble and Nirma.

GCPL rose by 6.78 per cent to close at Rs 725.80 and saw total volumes of 1,04,183 on the bourses. Over the past one week, the stock went up by 11.31 per cent. Similar trend was seen among some other players also.

Hindustan Lever (HLL) went up by 6.64 per cent over the week, while P&G went up by 13.30 per cent and closed at Rs 1095 on Friday.

Other gainers during the week were Colgate (up 5.71 per cent) and Nirma (up 5.86 per cent). HLL recently announced an increase in its prices in the range of Rs 1-30 in some products.

Deepak Jasani head of retail research at HDFC securities said, " A price volume action is being witnessed in the FMCG sector for the past few weeks. The YOY sales growth for the month of February was 10.6 per cent and this was also five year high for the sector." He added that increase in prices by HLL in certain products recently means that the pricing power is gradually returning to the FMCG companies. The market participants perceive that it is a defensive sector and the fall may not be too large even in case the market correct downwards."

Raveendra HC, an analyst with Angel Broking feels that the FMCG sector will post an increase in sales by 15 per cent. The sales of toilet soap from GCPL are likely to increase by 15 per cent , the hair dyes and colours are likely to increase by 25- 30 per cent and the liquid deter gent by 10 per cent.

He added that 15 per cent growth in the FMCG sector is expected in the current quarter. Nirma might catch up as it caters to the rural market and it is this market that drives the FMCG sector.