Fall in commodity prices a big benefit for FMCG companies: Prashasta Seth, IIFL AMC

In an interview with ET Now, Prashasta Seth, CEO, IIFL AMC, shares his views on markets. Excerpts:

ET Now: Good move coming in on FMCG these days. Yesterday it was United Spirits which rose because the shareholders gave a go-ahead for the agreement with Diageo, are the positives already in the price or do you see tremendous amount of upside even from the current levels?

Prashasta Seth: From a medium term perspective, the fall in commodity prices has been a big benefit for all FMCG companies. Companies which are dependent on agriculture inputs are seeing a much benign cost environment than what they have seen in the last three or four years and that is what is leading to a substantial upgrade in numbers for these companies which is being reflected in the stock moves.

It is also a function on how uncertain the markets are with respect to things globally. FMCG has traditionally been a defensive, so in an uncertain global environment, people would or might continue to move into some of these names because they provide a decent downside support. So, a combination of these two factors has led to sharp outperformance with the FMCG companies.

A lot of the positive news could be getting priced in at these levels from a fundamental perspective but my sense is that given the uncertain global environment, you might continue to see FMCG companies doing well. People would definitely allocate a portion of their funds to these companies and a lot of people were underweight on these companies. You might end up in a situation in which these companies might continue to do well.