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Defensive bets such as FMCG stocks are known to cap losses well in falling markets. These stocks also tend to be market favourites in rallies. The two FMCG funds — ICICI Pru FMCG and SBI FMCG Fund — which gained 20-24 per cent over the past year when the broader indices too have gained handsomely, bear testimony to this fact.
A big part of the rally has happened in the past three months, in which BSE FMCG and Nifty FMCG Index outperformed broader indices such as Sensex and Nifty 50 by 2-3 percentage points. FMCG funds, in turn, have raked in 16.5 per cent return, second only to banking funds that delivered around 17.4 per cent return. Interestingly, over the long term too, FMCG funds have delivered good returns. Over three-, five- and 10-year periods, these funds have delivered 17.5 per cent, 18 per cent and 19 per cent, respectively.
Two to tango Both ICICI Pru FMCG and SBI FMCG Fund have track records of over 15 years. While both funds continue to deliver healthy returns across time-frames, SBI FMCG has beaten its peer by a margin of 2-3 percentage points.
However, during market declines or volatility, both funds have contained the downside well. Although the funds are focussed on FMCG stocks, they take some exposure in related consumer segments such as services, retail, chemicals, paints, textiles and consumer durables.
ICICI Pru FMCG invests 71 per cent and SBI FMCG allocates 63 per cent of the portfolio to pure-play FMCG stocks.
SBI FMCG currently holds 15 stocks in which 64 per cent of the allocation goes to the top five stocks. The scheme invests a chunk (37 per cent) of its allocation in ITC, which saw a pick-up in performance in 2016 and continues to put up a good show.
But allocation to other individual stocks is limited to around 7 per cent.
A strong performance by textile stocks such as Sheela Foam and Indian Terrain Fashions over the past one year has helped the funds to offset the lacklustre performance of Jubilant FoodWorks. Other allied stocks such as VIP Industries and Titan Company have delivered good returns over the past one year.
ICICI Prudential FMCG holds 23 stocks with the top five stocks aggregating 51 per cent of its portfolio.
This fund also has a major exposure in ITC — 31 per cent. Allocation to other stocks is diffused and, barring one or two, limited to 5 per cent.
Stocks such as Pidilite Industries, Britannia Inds and Hindustan Unilever have delivered good returns for the fund. Jubilant FoodWorks has been an underperformer for the fund.
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