The Hindu Business Line : `Keep a keen watch on FMCG trends'

FMCG is one of the sectors that the market is raving about at the moment, a trend that leads us to Mr Nilesh Shah, CIO, Prudential ICICI MF. The latter manages an FMCG fund that has provided about 100 per cent in the last one year.

"This may well be the beginning for select stocks in the sector," he says. Excerpts from an interview:

Is there any steam left in FMCG counters?

In view of what has already happened in the stock market, we do not immediately expect a drastic re-rating in any sector. But this does not mean specific stocks in a particular sector will not see upsides. This general rule will apply to FMCG too. In fact, developments seem to be building up for select scrips in that area. I cannot give you names, but it is clear that there may be news around the corner. You will have to keep a keen watch on the trends that emerge from here onwards.

Where do you see FMCG majors such as ITC and HLL in the near term?

I do not wish to single out any name, but the two are different from each other in many respects. ITC has seen some serious buying in recent days, whereas HLL seems to have broken out a bit suddenly. As the numbers will tell you, there have been some rapid movements in the HLL counter over the past few sessions.

But aren't you under-invested in Lever?

That is correct. The stock, which became energised on the back of its quarterly results, was really not on everyone's radar. The company has talked about what it has achieved across several product categories and the kind of cost initiatives it has taken. It has to be seen how Lever closes this accounting year.

Is this an all-time high for equity?

It is important to look at valuations. In 1992, the Harshad Mehta-led rally took the index to 4,500, marked by a 50-plus trailing PE. In February 2000, thanks to the IT boom, it was 26 times trailing. Today, it is just about 18 times. So I essentially disagree with the view that this is an all-time high for Indian stocks.

Is the speed of advance a worry?

It is true that we moved from 8,000 to 9,000 points in 62 days, and to 10,000 points in 40 days or so. When the market is going northwards, it needs higher doses of cash to prop it up. Those who wish to buy now and stay invested may do so by all means.

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