The fast-moving consumer goods (FMCG) sector is experiencing robust growth fuelled by changing lifestyles, easier access, and growing awareness among semi-urban and rural pockets of the economy. The FMCG sector in India is estimated to reach US$ 220 billion by 2025 at a 14.9% CAGR.
The Indian FMCG industry has grown at a 9-year high rate of 16% in CY21, despite nationwide lockdowns. This trend is expected to persist with the rise in disposable incomes, internet penetration, and eCommerce businesses.
Below, we list the best FMCG stocks that you can consider for investment.
List of Top FMCG Stocks in NSE
- Godrej Consumer Products (GPCL)
- Nestle India
Overview of FMCG Stocks to Buy
Established in 1910, ITC is India’s leading FMCG marketer. ITC is primarily engaged in the business of manufacturing and distributing tobacco. It is involved in the business of hotels, paperboards, paper and packaging, and agribusiness. It also operates ITC Infotech, a wholly-owned subsidiary, which is a specialised global digital solutions provider. Aashirvaad, Sunfeast, Bingo, ITC Master Chef, Fabelle, Sunbean, Fiama, Savlon, Classmate, and Paperkraft are some of its notable brands.
The ITC share price has zoomed over 43% in the last year. ITC’s price has returned over 51% YTD. The ITC shares are likely to rally further due to a boost in consumption on account of the oncoming festival season.
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Founded in 1933, HUL is the first consumer company to cross Rs. 5 lakh crore market capitalisation in India. HUL’s product offerings span several categories, including fabric solutions, life essentials, home and hygiene, skincare, colour cosmetics, oral care, beverages, foods and health drinks. Lux, Lifebuoy, Surf excel, Pond’s, Vaseline, Lakmé, Dove, Sunsilk, Pepsodent, TRESemmé, Kissan, Kwality Wall’s, and Horlicks are some of its notable brands.
The HUL share price has risen by 17% in the past 3 months. On a YTD basis, the HUL share price has generated returns of 7%. The drop in commodity prices bodes well for HUL as it will result in better margin realisations. This will result in price relaxations, thus propelling consumer demand.
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A part of the Wadia Group, Britannia Industries is a leading Indian FMCG company, specialising in the food industry. Founded in 1892, Britannia is best known for its biscuits.
The Britannia share price has gone up by 7% in the past 3 months. Britannia shares have returned over 34% in the last 3 years. On a YTD basis, Britannia’s price has generated a tepid 1% return. Britannia’s future outlook looks bright as it continues to focus on high-margin value-added products, such as milk-based drinks, cheese, and dairy whiteners. Britannia also aims to improve its distribution networks, which will improve its margins going further.
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Godrej Consumer Products (GPCL)
Headquartered in Mumbai, Godrej Consumer Products is a leading FMCG company in India. GPCL markets products like soap, hair colourants, toiletries and liquid detergents under its various brands, namely Cinthol, Hit, Good Night, etc.
The Godrej Consumer Products share price has risen almost 20% in the last 3 months. But GPCL has fared poorly on a YTD basis. This price trend is projected to improve with an increase in GPCL’s sales growth trajectory and an abatement in material cost pressures. GPCL’s exports are also likely to pick up.
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Headquartered in Gurgaon, Nestle India is a subsidiary of Nestle, a Swiss MNC. Nestle’s product offerings include food, beverages, chocolate, and confectioneries.
The Nestle India share price has soared by 9% in the last 3 months. However, ITC’s share price has simmered down recently after the results announcement. But analysts continue to hold a favourable view of Nestle as it marches on the path of penetrating small towns & villages in Tier II-III cities, where it has been experiencing double-digit growth rates.
Check out the share price of Nestle India on Angel One before investing.
Things to Know Before Buying FMCG Sector Stocks
You should compare FMCG companies based on key financial metrics, such as profit margins, ROE, 5-year CAGR, cash flows, working capital cycles, and other return ratios. Companies with high ROCE and turnover ratios should be preferred.
FMCG stocks should also be analysed on their business models and growth potential. Is the company diversifying its business, is it introducing backward/forward integration, or is it moving to premium product segments?
Market Share and Brand Equity
Investors should prefer investing in reputable FMCG companies with significant market share and brand reputation. This is because such companies are likely to exhibit steady growth and innovation, and command customer loyalty—useful during economic slowdowns.
Supply Chain Management
In the aftermath of covid, companies have realised the importance of diversifying their supply sources and distribution networks. You should avoid investing in FMCG companies that are overly reliant on one source for their raw material needs.
Investors should strive to align their portfolio risk to their risk tolerance levels. FMCG stocks are cyclical and volatile. You should allocate only a small portion of your portfolio to FMCG stocks to reap diversification benefits.
With rural consumption set to grow due to a healthy rainfall season and the upcoming festival segment, FMCG companies have a cause for celebration. With commodity prices relenting and the Indian economy showing spurts of growth, FMCG stocks should see a rise in their stock prices.
While this does spell good news for investors, you should remember that your long-term investment decisions should be based on the fundamentals and valuation ratios of the company, and not solely on short-term price trends. Open your Demat account with Angel One to invest easily in all your favourite stocks.
Disclaimer: This blog is exclusively for educational purposes. The securities quoted are exemplary and are not recommendatory.