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'Nifty FMCG steadily growing; medium to long term investors can hold positions till 36,650-37,000'

The Nifty FMCG index has been steadily growing with support around 32,300 and seems ready for a breakout above 36,000. Investors with short to mid-term view may book profits now and investors with a medium to long term view may hold on to the positions till the levels of 36,650-37,000.

June 13, 2021 / 12:23 PM IST

FMCG or 'Fast Moving Consumer Goods' as the name suggests are the products that are high in demand with consumers and the turnaround time is quick. In this segment, volumes play an important role along with business cycles and ever-changing customer tastes and preferences. This sector being a classic example of monopolistic competition where firms maximize profits by product differentiation, price and marketing. This sector faces acute competition but is also one of the favoured segments for investment by the companies as this is the business which common man generally understands and relate to.

The Indian FMCG sector is currently estimated to be the fourth largest sector in the country, with household and personal care products accounting for about 50 percent of the total FMCG sales.

FMCG has grown by around 9.4 percent in Q4FY21 and the main reason for the growth seems to be coming from increased demand staples, essential non-foods and indulgence categories. The metro cities seem to have registered around 2.2 percent in the January-March quarter. The rural markets have grown at 14.6 percent in the March quarter after a 14.2 percent growth in the December quarter. This year is expected to be good with respect to the demand from rural markets due to expectations of a good monsoon and increased outlay in rural centric schemes like MNREGA which is expected to further boost the rural economy. The consumption growth in the January-March quarter of FY 2020-2021 was seen in both the food and non-food segment.

The second wave of the pandemic, though lockdowns are being lifted across states, seems to have had an impact on consumer spending and with the resurgence of such conditions, staples and essentials are given priority over other needs.

Another major trend affecting the FMCG growth is the increasing digitization, which is making an enormous inclusion including rural areas, almost all the major brands have partnered with e-commerce platforms like Amazon, Big Basket, Groffers etc.

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The Nifty FMCG index has been steadily growing with support around 32,300 and seems ready for a breakout above 36,000. Investors with short to mid-term view may book profits now and investors with a medium to long term view may hold on to the positions till the levels of 36,650-37,000.

Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Gaurav Garg is Head - Research & HCM at CapitalVia Global Research Limited- Investment Advisor. He has done Masters in Personnel Management and Industrial Relations (PMIR) from XLRI and B Tech from NIT.
first published: Jun 13, 2021 12:23 pm

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