NIFTY 50 v/s NIFTY FMCG

Day 37 Of covering FMCG

The recent gains in FMCG stocks has caught investors attention. the sector prospects looks good anticipating better monsoon , revival of rural growth and growing consumer interest in premium products.

Over the last three month , Nifty FMCG outperformed the Nifty 50 Benchmark. Nifty FMCG gained about 14% compare to Nifty 50 which climbed only by 8 %

Some of the FMCG stocks, such as Balrampur Chini Mills, Colgate-Palmolive (India), United Spirits, ITC, HUL and Radico Khaitan have jumped 18-27 per cent over the last three months. Shares of Dabur, Tata Consumer, Marico and Britannia Industries have gained 8-14 per cent during this period.

What drives FMCG stocks?

Analyst note that surge in rural demand, government efforts in increasing rural spending, coupled with impressive volume growth has affected the growth. Additionally , the markets are making new highs over and over again, ceating the risk of higher valuation and mainly due to this investors are becoming cautious and putting their hard earned money into defensive , consumer growth stocks.

Several analyst in their meeting and reports said that the growth of rural demand is increasing and many companies are expecting good volume growth for the rest of the year. And inflation is also coming to a low and stable stage which can in turn give that double digit kinda growth.

As other sectors gaining valuation and interest of the investors , the FMCG sector remains sluggish in the last two year mainly to the high inflation and low volume .

Some of the research analyst also mentions that the near average monsoon has raised the hopes of higher disposable income in the hands of rural population added with internet penetration , online shopping, demanding premium products are the major factors behind the growth.

ANALYST Recommendation

Singh of Angel One says investors can always keep a couple of leading FMCG stocks in their long-term portfolio, such as Dabur, HUL, Colgate, and ITC, as this sector has a more steady and solid growth path in years to come.

Mohta of B&K Securities recommends Dabur, Tata Consumer, Colgate and Varun Beverages from the sector.

HUL, United Spirits, ITC and Jubilant FoodWorks are top picks of SAMCO Securities' analyst.

Mehrotra of StoxBox is positive about HUL, ITC and Varun Beverages.

Lots of activities are happening in the FMCG arena with some companies are doing M&A , while some are doing CAPEX

Varun Beverages has outformed the streets estimates by acquiring The BEV co , expanding its manufacturing in different geographies and growing rural reach.The recent strategic moves include producing snacks like Cheetos and securing a deal with Premier Nutrition for Simba Muncheiz in Zimbabwe and Zambia.

For ITC, the companies expansion to chocolates, dairy and other FMCG products.

Quote of the Day:-

Invert, always invert: Turn a situation or problem upside down. Look at it back ward. What happens if all our plans go wrong? Where don’t we want to go, and how do you get there? Instead of looking for success, make a list of how to fail instead—through sloth, envy, resentment, self-pity, entitlement, all the mental habits of self-defeat. Avoid these qualities and you will succeed. Tell me where I’m going to die, that is, so I don’t go there.- Jacob Jacobi

Mohit Jain

Until next time