Sudip Bandyopadhyay on a must-have FMCG stock for your portfolio

Some amount of nervousness is there ahead of FAANG earnings this week. Everything from Apple to Microsoft and IT has rebounded. How do you approach IT now? Is it now a trade or after the series of IT earnings now behind us, do you find merit in investing again?

Our view that we need to be cautious on IT remains. In between, there was a pickup and recovery in IT stocks, particularly midcap, on the back of good results in some cases. Also the differentiated IT companies particularly who have focus on engineering, R&D and the production related software services we had a traction there and we did see that getting played out, but by and large top US corporate IT results are pointing towards a bit of a slowdown.

Statements coming from large IT companies and FAANG stocks as you classified them as is that there are slowing down on hiring, going ahead with some retrenchment that is not good news for Indian large IT companies as well.

While the body language and commentary of Indian IT management has been strong as far as demand is concerned and their prediction of margin also has been pretty robust but the ground reality which is getting played out on a daily basis whether it is US or Europe has not been to the liking of the market and that is the reason probably market is being cautious, also after this short rally we saw in IT I think some amount of profit booking is also coming.

I think a combination of all this is leading to this correction today but overall our view is that one needs to be extremely cautious. If you have a short to medium outlook do not be in IT, well if you are looking at long term yes take the opportunity of some of these sharp corrections and buy good quality IT stocks.

What do you make of the entire FMCG pack? of course has been the star performer but other names like Tata Consumer, , have all done quite well for themselves.?

Absolutely. I think a few things have happened as far as FMCG is concerned. Last quarter, which is the last quarter of the last fiscal, we did see significant cost pressures and that had to an extent continued even in the first part of the first quarter of the current fiscal.

However, what we did find is that the cost pressures have started easing and some of the frontline efficient FMCG companies have done two things; one is they have taken appropriate price hikes whenever possible, some of them have gone ahead and reduced the pack size and worked really hard on costs to maintain the margin or improve the margin.

HUL is a classic case where we have seen the margins have actually started moving up, volumes have started picking up. The second thing which has happened is the rural demand where there were significant concerns we did find that rural demand to an extent is kind of coming back, at least the first signs of that we have seen.

Also, with monsoon the way it is progressing and the expectation of a decent monsoon I think rural demand will be back. Now these two things are definitely making the FMCG stocks work wonders.

We have seen the results of some of them, particularly HUL, and all I think it is a good story. But having said that a lot of this excitement is already in the price so we have seen some amount of profit taking, some amount of correction after the results came out even in the case of HUL but from our point of view is that if you are a long term player in Indian equities and if you want to build a good portfolio a stock like HUL is a must have in your portfolio, buy it for the long term. If you are looking for a short term or a three to six months kind of a horizon maybe a lot of it is in the price.