FMCG funds best among thematic schemes in 2017

In the past one year, average return of FMCG category was 41%, at a time key benchmarks returned 25% to investors

India’s equity mutual funds, which primarily invest in fast-moving consumer goods (FMCG) stocks, have topped the performance chart among thematic funds. In the past one year, the average return of the FMCG category was 41 per cent, at a time when key benchmark stock indices returned about 25 per cent to investors. SBI FMCG is the leading scheme in the category with a return of 48 per cent, followed by ICICI Prudential FMCG Fund.
 
With such high returns, FMCG funds have toppled schemes from the banking and infrastructure sectors. Moreover, in all the fund categories, FMCG schemes are the second-best performers after the small-cap category funds, which returned over 44 per cent in the past one year.
 
According to fund managers, FMCG stocks can’t be avoided as they bring in a certain degree of safety in the overall portfolio. However, they add that current valuations in FMCG stocks do not make them very excited about the overall sector, but rule out any substantial reduction as upcoming growth is likely to be consumption-driven.
 
Ashish Ranawade, chief investment officer (CIO) of Union Mutual Fund, says, “One of the reasons for high returns from FMCG theme could be the low base effect last year as during demonetisation, several of these stocks were badly hammered. At 40-50 per cent of valuation, these stocks appear expensive but certainly there are other stocks related with consumer spending which one can look at.”
 
It is interesting to note that although FMCG funds may have returned in excess of 40 per cent, the one-year return of Nifty FMCG is about 26 per cent. The index, which is currently trading at around 25,700, had hit a 52-week low of 19,457 during December last year when the high-denomination currency notes were demonetised.
 

Stocks like United Spirits, Dabur India, Jubilant Food, Godrej Industries, Emami and Marico, among others, had witnessed a robust run over the past one year. Though they have corrected from their latest 52-weeks highs, they are still trading strong.
 
Fund managers say two themes are worth looking at in current times — consumption (including FMCG) and infrastructure space (amid government's continuous push on housing and roads).