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FMCG stocks have been firmly entrenched in the hearts of the market, with the representative BSE FMCG Index shooting 23 per cent in a year's time. This return roundly trounces the Sensex's and the broader BSE-500's 11 per cent decline. The FMCG index trades at a trailing earnings multiple of 33 times, well above the Sensex and BSE-500 multiples of 16.6 and 17.8 times.
FMCG stocks carry over 90 per cent of the weight in the index with the rest coming from consumer-oriented stocks such as Tata Global Beverages. FMCG stocks fared better than broader markets for quite a few reasons.
As a proportion of total spending, FMCGs account for little. Many of them, such as toothpastes, soaps, detergents and so on are for frequent use. This made it easier for companies to increase product prices and combat rising input costs. FMCG companies are either free of, or have low, debt which places them outside the interest worries plaguing other sectors. With a strong rural presence, companies were able to tap the considerable demand there.
Index heavyweights — Hindustan Unilever and ITC — have jumped 46 and 23 per cent respectively. Only two of the eleven stocks that make up this index have fallen in the past year — United Spirits and United Breweries, for obvious reasons. The best performer in this index is Jubilant FoodWorks, up 55 per cent, though it carries the least weight.
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