7 FMCG and textile stocks to bet on now: Hemang Jani

“Overall, I am keeping a positive view on the market and as we see more colour on the quarterly numbers, we will get more confidence and look at much higher levels in the coming weeks,” says Hemang Jani, Equity Strategist & Senior Group VP, MOFSL.

Is it still a trade in all those stocks that the markets are expecting to be privatised via disinvestment, OFS or other routes? Whichever way you look at it, it has been disappointing when it comes to that story?
Absolutely. The entire divestment thing has come to a standstill except may be LIC, where we finally saw some progress on the IPO front but oil marketing companies, Concor, BEML – in all these companies, there were high hopes of some divestment and the government kept pushing the deadlines but eventually because of that delay, the investors lost comfort in terms of putting the bids.

I do not think people would have the guts to go out and buy this for that reason but some of these companies at a certain price point may attract some buying because of the valuation in the core business parts. Concor, which has long term contracts with railways and a huge amount of advantage over there, may attract some buying interest because of the core business. But yes, I would definitely stay away from the policy sensitive companies like OMCs at this point of time.

Despite the 10% fall in crude, SGX is up by only 20 points or 30 points. Why is that?
While the crude was going up,we were in a bull market. From about $70-$75 per barrel, even when we had reached $100, the bull market had lasted. Now, even when we see the commodity prices coming off and the crude prices coming off, it is not necessarily good news for the flows, particularly since the dollar index is hitting new highs

The flows will play an important role and that is where people would not be very comfortable and these kind of things play out over a period of time. Maybe it will take three to six months because many times in the past, we have seen a sharp correction in crude and again it has bounced back for some reason. So to get a larger comfort, one needs to see stability and some sort of correction which may last for a few weeks or months. It is right that the market is not getting too excited at this point of time.

Cotton prices are down 30%. Textile as a category got completely rerated from spinning mills to retailers to exporters to garment makers. Any thoughts on that?
I think it is positive news for the integrated textile players and particularly the ones having a good presence in the export market. So, KPR Mills, Vardhaman Textiles, Himatsingka Seide Ltd are some of the names where we expect some positive ruboff but we also have to consider that now that China also has opened up and at many places, where we have seen that the Indian companies were competing with China now because of the reopening you might see some competition coming from there. However, having seen a severe correction in the midcap names with commodity prices coming off, one might see a good amount of buying interest in the names that I have talked about.

Can you tell me what is your pecking order in FMCG? Most of you are not looking at FMCG as the next leader in the markets?
In terms of pecking order, number one on that list would be Godrej Consumer Products because it has the biggest benefit in terms of the palm oil price and the other commodity prices having come off significantly, followed by HUL and Dabur. The fourth would be Britannia because we have also seen a sharp correction in wheat, sugar and many other agri commodities. These are the three or four names we can go with when it comes to FMCG.

A week from now do you think I will be doing the same 15,700, 15,800, 15,900, or I will say 16,000, 16,500?
Things are looking much better. I think having seen a big correction even if one is getting a little bit of consolidation. It is not a bad thing and we are seeing incremental participation coming through from the banks and consumer stocks after auto. So, newer sectors are emerging as leaders.

Overall, I am keeping a positive view on the market and as we see more colour on the quarterly numbers, we will get more confidence and look at much higher levels in the coming weeks.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)