Sugar, FMCG sectors can be part of the portfolio now: Anshul Saigal

Anshul Saigal, CIO, Kotak Mahindra AMC, says among agri producers, sugar is very sweetly poised both on account of the pricing having upward pressure as also the structure of the industry having improved because of the ethanol policy. We believe this space is very attractively poised. Then, comes the agri consumers. There again, we have seen wheat and cotton prices come off of late from highs. Sectors which benefit from this will be considered for portfolios

There is one sector which constantly disappoints whether it is hot weather, cold weather, too much rain or a global issue – it is the agrarian sector and stocks like UPL or Rallis or Tata Chemicals. This sector had a lot of promise but that was not delivered. Stocks like Advanta, Syngenta have struggled, Coromandel Fertilizers have suffered.
This sector has many parts. One is, of course, the agrochemicals that you alluded to. Then, there are food related sectors which benefit from food prices going up. These include sugar and sectors using agri commodities like FMCG, which get hurt when agri prices go up.

In agrochem, there are many moving parts. If rains are scanty, there are volume pressures. If raw material prices go up, you have margin pressures. Everything has to fall in place for this space to show expanding ROEs and it leads to valuation uptake. Unless that happens, you will see cyclical moves and then reversion to the mean which is what we have seen in recent times.

Among agri producers, sugar is very sweetly poised both on account of the pricing having upward pressure as also the structure of the industry having improved because of the ethanol policy. We believe this space is very attractively poised. Then, comes the agri consumers. There again, we have seen wheat and cotton prices come off of late from highs.

Sectors which benefit from this will be considered for portfolios as we speak today. That is the way I would look at it, not put this in one bucket, but split it into various buckets and see which bucket suits you at a given point in time for an investment.