The management of Marico Industries, a renowned FMCG company listed on the BSE, is looking at their stock from their investor’s point of view. In line with the thought they had very recently issued guidelines and warning to their investors whereby they asked them not to be too positive on the stock for at least 2 upcoming quarters owing to various business reasons.
This means that the company is not eyeing strong growth in the near future while it also emphasizes in a subtle way that investments should be strong during the low return expectation period. Another reason behind the sluggish growth expectations could be the strong rise in the input costs and raw material expenses that could be scaled to almost 80%.
The company has been running and expanding its business activities in Africa and Middle East. The current unrest prevailing in the political environment in the said regions and such exposure to political risk is also a business deterrent because of which business there is almost zero.
The third possible reason for the lack of business is the economic slowdown that the country is facing right now. With inflation rising at an uncontrolled pace and the purchasing power falling without knowing its end, lack of domestic demand in the FMCG sector is almost unavoidable.
Looking at all the factors mentioned above, the correction in the stock by about 10% on Sensex is understandable and a further dip might be expected.
’Bell the Bull’ says that the fundamentals still look strong and it shall be a good buy for those eyeing long term investments.