FMCG stocks may not give strong returns from the current levels but these can be added to the portfolio to avoid any downside risk, said Sanjeev Prasad, MD & Co-Head, Kotak Institutional Equities, in an interview with ET Now.
Prasad said that the market has many near-term headwinds and in case of any sharp correction consumer stocks will perform slightly better.
"We are looking at a market which probably will not give great returns from where we are. That is our central case for the next six months, given the macroeconomic outlook, expensive valuations, interest rates going up, inflation staying high and so on. I assume consumers will fit in that kind of scenario in the sense they will hold up along with the market and if for any reason, there is a steep correction in the market, consumers may hold out slightly better," said Prasad.
He, however, added that FMCG stocks may not make a lot of money from the current levels because valuations are too expensive, there are still a lot of issues on the demand side and profitability will continue to be under pressure given raw material-related price increases.
For the tractors segment, Prasad said one needs to look at the four segments – two-wheelers, four-wheelers, CVs and tractors - separately.
"Assuming we have a normal monsoon with some increase in food prices given global factors and also that the government may have to increase the MSP a lot more this time around, tractors should do well. CVs are also okay, I would think. On two-wheelers and four-wheelers, there are challenges, not only for companies given higher raw material prices, on top of that, supply-side disruptions also may continue for some more time," Prasad told ET Now.
Prasad said banking, oil & gas and telecom will be major contributors to the Nifty's earnings.
"For FY23, we have about 18 percent growth rate; for FY22 we have 28 percent which is largely done. So 17 percent is still a very good number and that is largely coming from sectors such as banking, oil and gas and telecom," said Prasad.
Disclaimer: This article is compiled from an ET Now interview. Views expressed by the analyst do not represent those of MintGenie.