1 week Ago By Heena Ojha
Morgan Stanley has revised its ratings on several prominent consumer stocks, highlighting a strategic shift in its preference for certain staples. The brokerage has upgraded Godrej Consumer Products Ltd. to 'overweight' from 'equal-weight', while Hindustan Unilever Ltd.
has been upgraded to 'equal-weight' from 'underweight'. Conversely, Dabur India Ltd. has been downgraded to 'underweight' from 'equal-weight'.
Morgan Stanley's emphasised the resilience of certain consumer staples amid global uncertainties. "We re-position our staples' preferences that are insulated from any reset," the note stated.The brokerage highlighted that the current global backdrop had created domestic uncertainty, providing defensives an opportunity to shine.
"We believe opportunities should be selective and not broad-based," Morgan Stanley noted, pointing to the potential for margin improvement in the consumer staples sector despite economic slowdown.Stock Recommendations Today: TCS, HAL, Consumer Stocks On Brokerages' RadarIn terms of competitive dynamics, Morgan Stanley observed that while competitive intensity might have waned, incumbents were unlikely to revive historical growth algorithms. The firm identified three fronts of competition for household and personal care businesses: pricing, product performance, and direct-to-consumer and e-commerce channels.
"We believe newer D2C brands/trends will continue to emerge and customer loyalty will remain low," the note added.Morgan Stanley's preferred picks in the staples sector now include GCPL and Tata Consumer Products Ltd., reflecting confidence in their growth trajectories and margin levers.
The firm also maintained an 'overweight' rating on ITC Ltd. and Varun Beverages Ltd., while keeping Dabur Ltd.
and Nestle India Ltd. at 'underweight'.The note had a cautionary outlook on commodity prices, stating, "Any sharp rise in commodity prices could have a negative impact on our earnings growth assumptions.
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