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In an interaction with CNBC-TV18 on Thursday, January 9, CLSA’s Vikash Kumar Jain said that staples has become the biggest “overweight” of their portfolio, after trimming their “overweight” stance on banks and commodities.
“Staples, I believe that that’s really the big sector call which we have taken very anti consensus. The kind of underspend that we have seen on government capex, both at the state level and the central level, I think that is also maybe hinting us on government’s changing priorities. If that happens, the investment and the capex linked stocks are already over excited and at elevated valuations,” Jain said.
Shares of most staples companies in India, from HUL, to Nestle India to ITC, or even Avenue Supermarts, have corrected between 20% to 30% from their peak so far.
Jain went on to explain that in case the government priorities do change towards more welfare, affordable consumption side of things, then it is the staples sector, which is already beaten down, will benefit from the same.
“That’s why we believe that the realities of coalition government and the hints that we have got from recent state elections, plus the good rainfall that we have seen and the good sowing that we have seen, maybe just bring back that affordable consumption to kind of life and within staples, we like the food related companies more,” he added.
The CLSA India analyst said that he is expecting earnings growth to be between 13% to 14% for financial year 2025 and that calendar year 2025 will be one of consolidation for the Indian markets.
The Nifty FMCG index is currently trading 1.2% higher with all stocks barring two, trading with gains. Colgate-Palmolive is currently the top gainer on the index with gains of over 4%, while those of Britannia too are trading with gains of close to 4%. Shares of HUL and Dabur are trading with gains of close to 3% each.
