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The FMCG space has indeed lived up to its ‘defensive’ tag in the market fall of the last one year. The BSE FMCG /Nifty FMCG indices dropped only by 6-7 per cent, compared to the 13-14 per cent fall in the bellwether Sensex and Nifty 50 indices.
The two FMCG funds available as on date — ICICI Pru FMCG fund and SBI FMCG fund — emerged good performers, with both containing losses better than their benchmarks. While ICICI Pru FMCG dropped about 5.3 per cent compared to its benchmark, the Nifty FMCG’s 6.8 per cent fall, the SBI FMCG fund lost only 2 per cent, as against the benchmark BSE FMCG’s 7.3 per cent plunge.
Where they scoredAlthough both the funds are focused on FMCG (consumer non-durables), they normally take some exposure to companies in allied consumer segments such as retail, paints, jewellery and consumer durables.
Hence, holdings in stocks in these sectors have helped the funds cash in on the pick-up in urban consumption during this period too.
In the last one year, SBI FMCG had 85-90 per cent allocations to consumer non-durables and the rest to other consumer segments. Though its top holding ITC lost about 5 per cent in the last one year, the 10-35 per cent gains made by stocks such as Britannia, Radico Khaitan, Manpasand Beverages and Kansai Nerolac Paints helped.
It also cut losses in a few cases by exiting losers such as Colgate- Palmolive and Nestle early. It re-entered Nestle in end-2015, though.
The ICICI Fund kept its FMCG holdings at 75-79 per cent during this period. Despite having consistent holdings of 2-3 per cent in some losing stocks such as Agro Tech Foods, Tata Global Beverages and United Spirits throughout the last one year, stocks such as Britannia, Pidilite, S H Kelkar and Marico, which put up solid gains, helped curtail the erosion in NAV to an extent.
Both funds did not take considerable cash/debt calls and were invested at over 95 per cent in equities in the last one year.
With FMCG stocks being market favourites across rallies and falls since 2009-10, the long-term returns of these funds also look good. Both funds have managed a five-year return of about 20 per cent, compared to the average 7-10 per cent clocked by large-cap and multi-cap oriented funds and 15 per cent average returns achieved by mid and small-cap funds.
But with valuations of FMCG stocks moving up sharply, it may not be an ideal time to invest in these funds now.
The BSE FMCG index now trades at a trailing PE of 44 times, compared with the 18.5 times the Sensex trades at.
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