FMCG - Remains a safe haven despite slower growth - Prabhudas Lilladher

- CNX FMCG Index outperformed NIFTY by 22% in the past 12 months and 5% in one month, as flight to safety continues amidst negative news flows from interest rate sensitive's

- Durable demand slows down: Discretionary segments showing lower demand; Cars sales have declined by 6.7% in FY13 (6% growth in FY12); two wheeler sales up by 3% in FY13 (12% in FY12); durables sales growth has also slowed down

- Staples demand: volume growth has slowed down, more so in discretionary segments like processed foods and premium personal care

- Jewellery and accessories: lower growth led by pressure on consumer wallet, decline in Gold prices like to boost the jewellery demand

- Rural Demand: Medium-term outlook in rural demand remains strong led by higher agri prices and 46% increase in allocation for rural spending (Rs800b) in run upto elections

- Input Costs: Input costs favourable for PFAD, Tio2 and copra; sugar and wheat prices are off their highs.

- Competition: Competitive activity is rising as HUL and Reckitt have been engaged in ad wars. Segments like detergents, soaps, oral care and skin care are witnessing higher advertising and sales promotion

- Food Services: QSRs likely to remain under pressure in the near term; Service tax to impact sales in times of tighter consumer wallet

- Positively inclined towards companies with strong pricing power or with benign input costs

- Large Cap Picks: ITC, HUL

- Mid Cap Picks: Titan Inds, Britannia and Pidilite

Source : Equity Bulls

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