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After paring value in the last five sessions, stocks of fast-moving consumer goods companies are likely to fall next week as well, as investors are seen booking profits. The BSE-FMCG index is also seen under-performing broader markets. Over the past week, stocks of sector heavyweights such as ITC and Hindustan Unilever shed value. ITC stocks fell after being down-weighted as part of a regular FTSE quarterly review.
Hindustan Unilever stocks fell on fears that the company may have to pay increased royalty to its parent company, following in the footsteps of PT Unilever Indonesia. However, it has dented sentiments on the stock. Any adverse development on the royalty payment issue could result in an additional pressure on the margin. We believe that in the current challenging environment, with the volume growth moderating, the company may be unable to resort to price hikes to offset the impact of royalty payments.
