- The outperformance of Indian FMCG stocks is largely driven by a flight to safety by some investors
- Amid uncertainty, investors chose safe havens such as FMCG stocks, although in recent sessions, stocks in other sectors have also risen
Shares of Hindustan Unilever Ltd (HUL) and Nestle India Ltd touched new 52-highs on Wednesday in early morning deals. With stocks world-over correcting owing to the impact of covid-19, the performance of Indian consumer stocks is striking to say the least. In comparison, shares of Unilever Plc are trading about 22% lower on London Stock Exchange compared to 52-week highs.
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The outperformance of Indian fast moving consumer goods (FMCG) stocks is largely driven by a flight to safety by some investors. While foreign investors have fled the Indian stock market in droves, domestic institutions are still receiving regular flows and are buying. In the current backdrop of uncertainty, they are choosing safe havens such as FMCG stocks, although in recent sessions stocks from other sectors have also risen.
Investors believe in HUL’s execution capabilities and distribution might. “Although, Nestle India is relatively better placed than HUL, as most of its portfolio consists of food products and in such times, consumers prefer a good brand. Some of HUL’s products can be vulnerable to slowing discretionary spending,” said Nitin Gupta, analyst at SBICAP Securities Ltd.
Source: livemint
