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

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.