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Funds hike FMCG allocations - Views on News from Equitymaster
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  • Jan 16, 2001

    Funds hike FMCG allocations

    Equity funds seem to be very bullish on the fast moving consumer goods (FMCG) sector. It does not take a genius to guess which sector is going to be closely monitored by fund managers in the coming months.

    First it was the FMCG and software sectors in 1998-99. Then it was only software in 1999. Now its FMCG. After the severe depression caused by software in the Year 2000, funds are opting for something far safer, viz. FMCG.

    Equity funds Date of holding % Holding NAV (Rs)
     UGS 10000 27 Sep,2000 43.8 11.4
     Sundaram Tax Saver 1997 31 Mar,1999 26.3 7.5
     K MNC 5 Jan,2001 24.4 9.4
     Canpep91 31 Mar,2000 22.8 9.8
     HDFC Growth Fund (Gr) 30 Nov,2000 18.1 9.2
     JM Equity Fund (Gr) 31 Oct,2000 18.0 9.5
     Tata Young Citizens 29 Dec,2000 18.0 10.3
     Canpep95 29 Sep,2000 16.0 9.7
     DSP ML Equity Fund 30 Nov,2000 15.4 16.6
     Magnum Multiplier Plus 1993 31 Dec,2000 15.2 14.0
     Birla MNC Fund (Gr) 31 Oct,2000 15.0 29.6
     Canbonus 30 Sep,2000 14.9 9.5
     Magnum Equity Fund 29 Dec,2000 14.8 12.4
     Alliance Buy India (Gr) 31 Dec,2000 14.8 5.9
     K 30 5 Jan,2001 14.3 14.8

    (The above table does not have any sectoral FMCG fund)

    Having got the thumbs down for most of last year, FMCG allocations are climbing significantly. Most fund managers we have spoken to are still very positive on the sector, despite the poor growth last year. For instance, sample this from Vivek Reddy (CEO – Kothari Pioneer MF) ‘We continue to be confident of the pharma and FMCG sectors.’

    One reason why some funds have taken exposure to FMCG stocks is because these stocks act as a hedge in times of volatility. FMCG stocks rarely if ever fall as hard as say technology, media and telecom.

    In any case, one point that got increasingly highlighted over the last couple of months is the role of old economy stocks (including FMCG) in a fund’s portfolio. Funds have realized that the domination of new economy stocks is all but over and the formula for success in 2001 is likely to be a prudent combination of the old and new economy stocks. This means that the FMCG comeback story is going to last for a while.



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