CLSA has announced its decision to downgrade the shares of FMCG giant Hindustan Unilever to 'sell from 'underperform'.

The brokerage also said that it is setting a target price of Rs 430 for the shares of the company following a significant rally in the share prices.  It said that the downgrade is mainly due to a weak macroeconomic environment, a slowdown in revenue growth in soaps and detergents, weak trend in discretionary segments and margins are likely to be passed to the customers.

The analysts noted that consumer sentiment has remained weak and customers are facing pressure due to increasing inflation in the country. CLSA said that even after the downgrade, the current valuations are at 27x one year forward earnings are high when compared with less than 10 per cent EPS growth.

"While the concerns on growth and increase in royalty have brought down HUL's PE from a peak of 35x to 27x now, we still find these valuations expensive in the context of a moderate less than 10 per cent EPS CAGR over FY13-15CL. We remain negative on the stock though, downgrade the stock to 'sell' following the recent run-up in the stock price," the CLSA report said.