Stocks of fast-moving consumer goods companies are expected to fall in value in the week ahead as investors shift their focus to shares of companies in other sectors such as retail, airline, and broadcasting. Late Friday, the government allowed 51% foreign direct investment in multi-brand retail, while relaxing local sourcing norms for attracting FDI in single-brand retail. It also relaxed norms for foreign airlines to buy up to 49% equity in domestic carriers. The government also increased the FDI limit in broadcast services to 74% across the board.
Investors are therefore expected to be drawn to stocks in these sectors, which are grossly undervalued, in sharp contrast to FMCG stocks that are trading at multiple times their earnings per share in 2011-12 (Apr-Mar). On Thursday, the government announced a hike in diesel prices, which was followed by the announcement of a third quantitative easing by the US Federal Reserve. This spurred Indian share indices to end higher by over 2.5% Friday.
Over the past week, the BSE FMCG Index has gained 0.8%, in contrast to the 4% gain clocked by the Nifty and Sensex. However, the fall in shares of sector majors such as ITC Ltd and Hindustan Unilever Ltd is expected to capped.
Investors are therefore expected to be drawn to stocks in these sectors, which are grossly undervalued, in sharp contrast to FMCG stocks that are trading at multiple times their earnings per share in 2011-12 (Apr-Mar). On Thursday, the government announced a hike in diesel prices, which was followed by the announcement of a third quantitative easing by the US Federal Reserve. This spurred Indian share indices to end higher by over 2.5% Friday.
Over the past week, the BSE FMCG Index has gained 0.8%, in contrast to the 4% gain clocked by the Nifty and Sensex. However, the fall in shares of sector majors such as ITC Ltd and Hindustan Unilever Ltd is expected to capped.
