What is your take on the FMCG sector?
One, the monsoon progress thus far has been quite good and the prediction for the monsoon has been normal. The fortunes of FMCG companies are kind of linked with the way the monsoon progresses going forward. So we will have a situation where normal monsoons will mean rural economic activity will be on a higher plateau and once we reach September, potentially the country will be out of the lockdown and in such a situation, FMCG demand will significantly move up from quarter on quarter perspective.
I would reckon that what Lever has been trying to tell us in terms of the recovery to be seen signifies that they are being a little cautious. I would read between the lines and say they are looking at a situation where by September there will be a substantial revival in demand and we will generally look at many of these FMCG companies because there is a story developing in terms of the ramp up in volumes that will happens once the lockdown lifts and the monsoon we get to know has been normal. So we would be positive on the FMCG sector as we go forward.
The AGR hearing is going to be extremely critical in terms of the payment of dues. Having said that, the stock has sustained a fair amount of surge and resilience as well. To your mind, what is the prospect of Idea going forward and should one stick with Bharti and Reliance?
As far as the telecom space is concerned, it has done relatively well in this market and Vodafone Idea has been a stark underperformer. Let me go back to the days when Idea had come out with its rights issues. I think it was roughly about Rs 12.50 the rights issued had come in at. Many of those investors during the rights issue are now sitting on losses. Fortunately for them, the losses have been substantially recovered because of this run up that we are seeing from Rs 3 to Rs 10. Having said that, the fundamental issue for Vodafone is how it will take care of its liabilities going forward and the matter which is with the Supreme Court right now is crucial to answering that question.
The principle that has been established here for the telecom companies is that there will be some leeway given. There will be a time gap allowed in terms of payment of the dues and the only important thing to know is if there is going to be a one time settlement component within that, which I believe would not be there. But the telecom companies will get relief in terms of the staggered payments and they will be able to do the needful to be reaffirmed during this Supreme Court hearing matter. Once that gets done, probably the stock will rise further. That is what we are seeing because the telecom sector as a whole is stressed with a huge amount of debt and liabilities. So we will await this outcome but nevertheless I must tell you that we are not too excited about a company like Vodafone. We would rather stick to the larger names the Airtel and Reliance.
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