FMCG: Dark Horse Sector

As we all know that India's population is around 1.3 billion and it is also a consumer market with second largest population. We all are using basic products related to our consumption or hygiene.

Just take example of yourself, your day starts with brushing, bathing, having some snacks, tea or coffee in breakfast and many more. So basically we all use soap, shampoo, toothpaste, biscuit, beverage, etc. With increasing population and improving the standard of living of the people, the demand for all these FMCG products will increase in the future.

Also, this is the only sector in our market which is less affected in any market crash or small correction. This sector moves slowly and investor won't even realise when the sector or FMCG stocks appreciate. So it is a dark horse or silent mover in market and this is the reason it is one of the favourite sector of few investors. Their business is easy to understand and any skilled leader can run the company. It doesn't require any expertise like Pharma, Metal, Power business. Also, it is not capital intensive business and operation keeps on running because of running demand. Often you will see that this company has less debt on their balance sheet.

If you are looking for any sector for investment and particularly for time frame of 10 years or more than FMCG sector is the best. It will move slowly and will definitely give you good returns in the future. This sector is termed as "Buy and Forget."

Some of the good listed companies in FMCG sector and their brands are:

• Hindustan Unilever:

• ITC:

ITC is in other businesses also like Hotel, Cigarette, Paper, Agarbatti, IT. So its diversified companies for an investors and returns would be less compared to its FMCG competitors.

• Dabur:

• Marico:

• Godrej Consumer:

• P&G:

• Colgate:

• Nestle India:

• Britannia:

If you have patience to hold these stocks for atleast 5 years, then only add these stocks in the portfolio. You can also add this stock on monthly basis in few quantities like SIP.

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Before believing anyone one should check the past performance of these companies in the long term, then only we can have conviction in holding these businesses in portfolio.

Last 10 years Compounded Annual Growth Rate (CAGR) in share price:

This is the total returns of the company in last many years. Some company got listed little late so returns are calculated from their listing price.

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Let's have some fundamental check of all the companies:

FMCG business is a high volume and low margin business because of high demand in the consumer market.

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Investing in direct equity is slightly more risky for an investor who doesn't track the business of the company. Best option to reduce this risk is by diversification in different companies. One of the suitable option for risk-averse investors can be mutual funds. Investor can directly buy mutual fund as one time investment or do consistent Systematic Investment Plan (SIP) every month or year. Some benefit of SIP is investor can buy and add more units of mutual funds whenever market corrects and this will give investor cost average benefit.

Some of the mutual fund in FMCG and Consumption sector are:

1. SBI Consumption Opportunities (includes other consumption stocks as well)

2. ICICI Pru FMCG Fund

Don't believe us, do proper study. Check expense ratio, exit load and background of the fund manager who is managing this fund. Some homework you should do because it's your capital and you are responsible for your money.

Others can pick few stocks from above mentioned list, can do due diligence and buy it gradually every month.

"There is no shortcut to wealth creation; give your capital and ample of time to grow your capital into wealth."

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If you want full sector analysis about FMCG sector in India, then let us know in the comment section. We will create that for our friends. It's an interesting sector to understand and also a wealth creator for investors.

We have covered Online Food Delivery Business last week. Those who have missed can read it: Online Food Delivery Industry Analysis

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