Mutual Funds

Mixed performance by FMCGs

Nithya Palani | Updated on May 27, 2018 Published on May 27, 2018

The funds have adopted a different approach to picking stocks

FMCG stocks have rallied well in the past one year. BSE FMCG and NSE FMCG gained by around 15-20 per cent. The performance of these stocks has been notable, as they have managed to contain downsides even in the recent rally. There are just a couple of funds in the FMCG category — ICICI Pru FMCG and SBI Consumption Opportunities Fund (earlier called SBI FMCG). SBI Consumption Opportunities Fund will invest in the overall consumption theme rather than in FMCG stocks alone.

FMCG stocks are considered defensive bets that cap losses during falling markets. Though both SBI Consumption Opportunities and ICICI Pru FMCG invest in FMCG stocks, SBI Consumption Opportunities Fund posted relatively better performance, given its different approach in picking stocks and constructing its portfolio.

SBI Consumption Opportunities Fund has outperformed the benchmark, BSE FMCG, by 5-12 percentage points over one-, three- and five-year time-frames. ICICI Pru FMCG fund has outperformed its benchmark — the Nifty FMCG — by around 2.5 percentage points over a five-year period, while under-performing, albeit mildly, over shorter time-frames.

During the past one year, SBI Consumption Opportunities Fund participated in the mid-cap rally, which delivered higher returns than the benchmark and the peer. ICICI Pru FMCG continued to have higher exposure to large-cap stocks, missing out on the returns from the mid-cap rally.

Portfolio moves

SBI Consumption Opportunities Fund and ICICI Pru FMCG have allocated around 78 per cent and 80 per cent of their assets, respectively, in FMCG stocks. These funds also have exposure to sectors such as retailing, textiles and consumer durables.

Currently, SBI Consumption Opportunities Fund has 17 stocks in its portfolio, of which the top five constitute around 50-55 per cent. A chunk of its corpus (27 per cent) is allocated to ITC, and exposure to other stocks is generally less than 10 per cent.

ICICI Pru FMCG holds 21 stocks in its portfolio and its top five stocks constitute 50-55 per cent of the portfolio. This fund, too, has parked a chunk of its corpus (32 per cent) in ITC.

Stock picks such as Radico Khaitan, Jubilant FoodWorks and Thangamayil Jewellery have worked well for SBI Consumption Opportunities, while a few stocks such as Colgate-Palmolive, ITC and Hawkins Cooker have hampered returns, given their lacklustre show over the past couple of years. But broadly, the consumption theme seems to have worked, with stocks outside the FMCG space delivering stellar returns.

ICICI Pru FMCG’s stock picks such as S H Kelkar & Company, Aditya Birla Fashion and Retail and Colgate-Palmolive have dampened the overall returns of the fund in the past one year. However, investments in Jubilant FoodWorks, Britannia Industries and Eveready Industries have worked well for the fund in the past one year.

ICIC Pru FMCG has exited Pidilite Industries, Sheela Foam, and VIP Industries in the past one year and added stocks that are steady performers, such as Page Industries, Marico and Godrej Consumer Products.

SBI Consumption Opportunities Fund has exited stocks such as Titan Company, United Breweries and VIP Industries in the past one year and added GlaxoSmithKline Consumer Healthcare, Prataap Snacks and LT Foods.

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