HUL, Godrej top FMCG stocks to bet on: Nitin Raheja

The focus has to be on companies and corporates in India who have minimal debt, says the Co-Founder of AQF Advisors.

What is your outlook on the consumption space? How do you see the FMCG sector shaping up? Do you think with strong growth from rural areas, we could see a commendable recovery in this space?
I think the consumption space will hold up quite well due to the reasons you mentioned. The rural areas are doing well; but we do not see this in Mumbai. But the monsoon has covered the country two weeks ahead of schedule and there is a huge leg up in the crop that has been sown compared to last year. So you are looking for a good harvest and crop this year. You should see the rural areas holding themselves up.

But again, it is the urban areas which did account for a dominant share of sales. But within the FMCG space, companies such as Hindustan Lever hold themselves up quite well because they have a very strong rural base; even Godrej. On the other hand, you should probably see the agrochemical business do exceptionally well in this current year given the advance cropping that has happened.

Is there a possibility of any kind of surprise impact from an event risk in the US markets?
So considering the kind of flows that you see from FIIs, you could insulate yourself to a lesser extent. I do not think you are going to be able to completely insulate yourself. So when you do see a broad-based selling starting to happen, you see that across the board. If you want to neutralise these broad liquidity moves, what we have seen is that the FMCG space and the MNC space holds itself up far better. But these events are very difficult to predict in terms of what is going to happen to the US market. You could have a play out from a perspective that you know that four months down the road, you have elections and generally speaking, in the run ups to the elections, the US markets have remained buoyant. So the flows could also be positive. And then you could very well miss out on the rally and at which point of time that segment could underperform.

So I do not think if you are playing this game just from the liquidity perspective or in terms of what is going to happen in the US markets. I think the focus has to be again on companies and corporates in India who have minimal debt, who are playing out the Make in India story, who are going to benefit from the whole China developments that are taking place and whose working capital is tight. I think these are companies which will, irrespective of flows demonstrate and trade a premium.