FMCG stocks on a tear!

Fri, 24 Sep 01:30 pm

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Persistent buying activity led the Indian markets to rise higher into the positive territory during the previous two hours of trade. Currently stocks from the consumer durables, realty and FMCG spaces are amongst the top gainers, while those from the IT and metal indices are the top underperformers. The market sentiment is optimistic as there are 1.8 gainers for every loser on the overall BSE.

The BSE-Sensex is trading higher by around 110 points (up 0.6%), while the NSE-Nifty is up by about 35 points (up 0.6%). Stocks from the small and midcap spaces are however seeing more interest as the BSE-Midcap and BSE-Smallcap indices are trading higher by 0.8% and 1.0% respectively. The rupee is trading at 45.52 to the US dollar.

Stocks of pharmaceutical companies are currently trading firm led by Dishman Pharma, Biocon and Ipca Labs. The stock of Aurobindo Pharma is also trading firm on news of the company receiving final approvals from the US health regulator, the US FDA (Food and Drug Administration), to sell its generic 'Ampicillin' and 'Sulbactam' for injections in multiple strengths. The FDA is believed to have approved three Abbreviated New Drug Applications (ANDA) for these injections. These are used to treat skin infections, abdominal and gynecological infections. The Ampicillin and Sulbactam for injection is a generic version of Pfizer's drug ‘Unasyn’, which is believed to have a market size of US$ 50 m (approximately Rs 2.3 bn) as of June 2009. This is a positive for the company and will enable it to bolster revenues from the highly competitive US generics market.

FMCG stocks have seen a sharp increase in price over the last few days with the BSE-FMCG index registering an increase of about 10% in the last 30 days. In fact, heavy weights like HUL and ITC have grown even fast, registering a growth of over 12.5% and over 10.5% respectively during the same period.

One of the reasons for this has been the recent price hikes taken the industry as a whole to protect margins. Another reason is that the BSE-FMCG index had been an under performer over the past year due to high valuations of FMCG companies. However, the recent FII funds entering the country have seen investing into this sector as a hedge against their other investments thereby pushing up the valuations further.