CNBC-TV18’s Executive Editor, Udayan Mukherjee - The question that you need to ask yourself now is - is it a good time to buy FMCG stocks? It may be for a bit longer. If you are of the school, which says I don’t mind getting a 10% return from here but I just don’t want my stock to collapse, then I think FMCG probably is a good place to be and that’s the psyche of the investor right now - protection of capital, modest gains, dividend yields and FMCG fits the bill.
 
But what is going on right now is a little bit of churning of the ownership in FMCG stocks. I think people haven’t still fully adjusted back, they are complete under ownership of FMCG back to fair ownership and that is the story which is playing out. Once that is done I think you might struggle to see huge outperformance in FMCG stocks because you just have to look at valuations.

Hindustan Unilever is no longer at Rs 180 it is at Rs 250 plus. Even if they do Rs 10 earnings at the end of this calendar, you are talking 25-times current year’s earnings that’s three-quarters forward for Hindustan Unilever in a market which is trading at probably 14-15 times. So significant premium to the market already for this FMCG stock - you look at Dabur, Colgate, Marico, they are all trading at 21-22 times FY09 earnings.
 
My sense is that this is not a cheap sector. It’s under owned and therefore it’s playing back its defensive therefore it is moving back. But another 10% from here maybe Hindustan Unilever gets to Rs 280, even ITC gets back to Rs 230 and after that you will probably struggle for outperformance out here.

I don’t think beyond those levels these stocks merit to go up a whole lot given the kind of relative value, which exists in the rest of the market. They may not fall much so they are still defensive and will play true to colour. But from here expect a more than 10-12% bounce in the FMCG lot given valuations seems to be a bit challenge to me. They are probably better of bought when the market sells off and you get these stocks on a really bad day.