Resilient Against All Odds: The FMCG Sector in India 

Cometh the moment, cometh the stocks

As we speak, the Omicron BF.7 variant from China seems to be knocking at our door once again. As an investor, this might be a cause for concern – you may not want to risk your funds suffering from another pandemic-induced crash and yet you probably do not want to leave the stock market for fixed income instruments with low returns either (like gold or bonds). You need a set of stocks that has a proven track record of performing for their investors right through the pandemic and associated challenges.

The Covid pandemic, followed by global inflation due to both rising fuel costs as well as Covid-induced government spending, had caused a fall in consumer spending in general across sectors. Now the storm seems to have ended and a few major stocks seem to have pushed through with vigour. However, the sector that stands out in this respect is the category of Fast Moving Consumer Goods or FMCG. Therefore, perhaps the FMCG sector might be able to offer you a way out here in the coming months.

Let us see some numbers that help us understand this proposition.

Sector performance

For starters, the Nifty FMCG index has grown by 20.92% in the last one year, thereby becoming the 4th best performing sectoral index in 2022. In fact, such returns have hardly been given by this index since 2017. If you are wondering to what extent base effect is a cause for such high performance, know that the overall growth of the index in the last three years and the last five years has been 47.89% and 66.59% respectively. This December, it reached a new all time high of 46,331.20 points. This certainly proves to a great extent that the sector has performed consistently for its investors in the last 5 years.

Major contributors

The following stocks have contributed majorly to boosting the jumps made by the Nifty FMCG Index – 

1. ITC Ltd. – The ITC share price has increased by 52.45% in the last 1 year. The company enjoys a market cap of over Rs. 4.15 lakh crores. However, the company has a multitude of industries that come under it, some which (such as the hotel business) contributed to the recent increase in its share price increase.
2. Britannia Industries Ltd. – The Britannia Industries share price has increased by 23.52% in the last 1 year. The company has been increasing its market share and its market cap recently crossed Rs. 1 lakh crore.
3. Hindustan Unilever Ltd. – The company is a market leader with a market cap of around Rs. 6.15 crores. However, the Hindustan Unilever share price has increased by only about 12.82% in the last 1 year. 

While the above stocks in the FMCG sector showed robust growth, there were some FMCG stocks which failed to bring returns overall to their investors. For example, the Godrej Consumer Products share price fell by 7.48% in the past 12 months. Similarly the Emami Ltd. share price has fallen by even further, i.e. 19.81% in the same period. However, overall, as we have seen before, the FMCG sector has been able to power through all challenges offered in the last three years.

Final words

All in all, if you are worried about whether the new variant in China named BF.7 will dampen the stock market once more, you may find the FMCG sector a good place to park your funds for the time being. If you do not have a demat account, open demat account today with Angel One, India’s trusted broker.

Disclaimer: This article has been written for educational purposes only. The securities quoted are simply examples and not recommendations.