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Stocks of fast-moving consumer goods companies are seen in a narrow range next week as investors may hold on to their positions in this defensive sector amid weakness in the market. However, investors are unlikely to take new positions in these stocks as valuations are stretched currently. Underlying sentiment on these stocks remains positives as FMCG companies' Jul-Sep earnings have been mostly in line with estimates so far.
Sector heavyweight Hindustan Unilever yesterday reported Jul-Sep net profit of 8.07 bln rupees, up 17.1% from a year ago. Net sales grew 11.6% to 61.55 bln rupees. The company's bottomline came better than expected but topline growth disappointed. Hindustan Unilever's operating margin increased 100 basis points to 15.48% in Jul-Sep as the company hiked product prices. However, lower-than-expected growth of 7% in the company's sales volumes will weigh on investor sentiment in the next couple of sessions. Later next week, the share may recover because the company's fundamentals remain strong.
Dabur India's quarterly earnings also came in line with estimates today. The company's Jul-Sep consolidated net profit rose 16.4% from a year ago to 2.02 bln rupees, and net sales increased 20.6% to 15.23 bln rupees. Sentiment on ITC remains bullish after the company's earnings topped estimates last week. Profit booking pulled the share down this week.
