Pharma and FMCG stocks have come-off a great deal over the last few months, as investors have poured money into high quality banking and IT names. However, as interest rates are likely to rise, the question that now arises is it time to now move money at least partially to pharma and FMCG stocks. Here are a few that are closed to 52-week lows.
The stock of Colgate Palmolive is barely 1% away from its 52-week low. The stock was last trading at Rs 1426, as against the 52-week low price of Rs 1414. While the stock has fallen the problem for FMCG stocks is that growth has been hard to come-by. Apart from this, rising input costs is also fast eroding margins. Some of these stocks, especially the high quality names are already commanding a hefty price to earnings multiples.
This stock is just 8% away from its 52-week low, which again and was last trading at Rs 2305, as against the 52-week low price of Rs 2120. HUL also is likely to see margins erode as input costs rise.
At the moment it is hard for FMCG stocks to really rally significantly as volumes are also difficult to come by. It's also hard to raise prices, as these tend to impact rural demand. In any case, these stocks command a significant premium and if growth does not happen, it's hard to justify buying into these stocks.
AstraZeneca is a subsidiary of AstraZeneca Plc, again like Colgate and HUL, it's owned by foreign multinationals. This stock is trading just 3% away from lows. A few months into the covid crisis, we saw good demand for pharma company stocks, some of which rallied significantly. However, investors have now moved money to economy related stocks, where they see robust growth going ahead. This is one reason, we have seen pharma stocks falling.
ZydusWelness is a leading player in the wellness business with brands like Complan, Sugar Free, Glucon-D, Everyuth, Nycil, Sugarlite and Nutralite. Most investors remain weary of sharp growth not being possible some of these companies. For example, investors are willing to pay a premium for growth and a classic example is Reliance, where they see several businesses growing rapidly. For FMCG and pharma it has now become an increasing challenge to report sharp growth.
Again, like some of its peers it is just a tad bit away from 52-week lows. In fact, the stock is just 2.93% away from lows. It was last seen trading at Rs 593, against a 52-week low price of Rs 575. Investors who do not have defensives in their portfolio can buy into some of the high-quality names. In case there is a sharp collapse in the markets, these stocks being defensive may manage to hold.
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