The Hindu Business Line : `FMCG stocks a safe defensive bet'

That's probably one question that is surfacing as the stock price of Hindustan Lever Ltd (HLL), the country's largest consumer goods company, was largely unchanged bucking the general market trend. About 40-50 per cent of HLL's sales revenues comes from the rural market.

The stock, which was ruling firm during initial trades on Friday, was hovering at around Rs 141 levels at close. Brokers and dealers alike were of the view that the lack of reaction so to speak was on account of the fact that the counter had been battered down heavily in the recent past.

"Bad numbers, price cuts, the counter has already factored in all possible negatives," said a dealer.

Market sources maintain that unlike the rest of the market there is no hedge fund participation in the stock. A section of the market is also of the view that the FMCG sector is one that is least impacted by any changes at the Centre.

"A non-political sector like FMCG is a safe defensive bet," said Mr Hanu Bhatia, Vice-President (Equities), Parag Parikh Securities. Reiterating this is Mr Nilesh Shah, CEO of Edelweiss Capital, who says that FMCG is a preferred sector during times of uncertainty.

According to analysts, the stock has been ruling around Rs 141-142 levels post announcement of its previous quarter results.

"The good monsoon had brought back some rural demand. In fact, the topline of companies such as Dabur and Asian Paints did reflect this. Yet there was no evidence of this in HLL's first quarter results. While one did see volume growth, HLL's topline did not grow as much as the other companies on account of the price cuts. Given that the market has already discounted the stock, there is really not much room for any sharp upside or downside. Going forward the next round of numbers - July - could probably define a trend," an analyst tracking the company said.

"The stock has been battered so badly that people have lost interest in it. Besides, it doesn't form a large portion of anyone's portfolio," Mr Arun Kejriwal of KRIS said.

HLL ended at Rs 141.50 with around 16.7 lakh shares traded on the BSE. Other FMCG counters such as Britannia Ind and Colgate-Palmolive also ended on a positive note at Rs 580 and Rs 125.90 respectively on the BSE.

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