Dec 17, 2003|
FMCG: Fast moving...
Markets all over the world have been on a roll in 2003 and the Indian bourses are no exception having gained almost 60% in 2003. During this period, while there are sectors that have outperformed this benchmark index by substantial margins, there are also sectors that have not kept pace with the general market trend during the last one-year. FMCG is one such sector, which has grossly underperformed the BSE-Sensex in 2003 by registering gains of just 33% on the BSE FMCG Index (see chart below). However, during the last couple of months, this sector has shot back into the limelight.
While the chart above shows the BSE FMCG Index lagging behind when considered since January 2003 to date, if we look at their performance over the last couple of months, the BSE FMCG Index has managed to outperform the benchmark index. Just to put things in perspective, while the former has risen by 14% since November 2003, the latter has posted a rise of only 7%. The table below shows some of the FMCG gainers during the last one-month.
FMCG gainers over the month
* Trailing 12 months
So, what has led to this build up of interest amongst investors towards the sector in the last couple of months?
The most important of all was the normal and evenly spread monsoons witnessed in the country in 2003, which improved the prospects of our economic growth. The consensus estimate of GDP growth for India rests at about 7% in FY04 and the expectation is that with the improving economic outlook, rural India demand will pick up. The euphoria towards the sector was not immediately seen during 2QFY04 at the time of good monsoons because the effects of good monsoons are generally felt on the economy with a lag effect of about 6 months to 1 year.
Many of the companies listed above utilized the downturn period to become more efficient, through more focus on their brands and distribution chains. Most companies saw an improvement in their working capital efficiencies. Further, over the long term, the efforts on the infrastructure front (roads, rails, power, river linking) are likely to enhance the living standards across India. Till date, India's per capita consumption of most FMCG products is much below world averages. This is the latent potential that most FMCG companies are looking at. Even in the much-penetrated categories like soaps/detergents companies are focusing on getting the consumer up the value chain. Going forward, much of the battle will be fought on sophisticated distribution strengths.
From the stock market perspective, the valuations in the FMCG sector were relatively attractive and considering the limited downside and the potential upside for the companies and the sector as a whole, FMCG stocks attracted buying interest. To conclude, as per NCAER estimates, the ratio of the consuming class to total households will touch 46% by FY07 (17.4% in FY95). All this bodes well for the Indian FMCG sector.
More Views on News
Aug 9, 2017
While GST implementation brought down volumes and profitability in the short run, Marico remains optimistic in the long run.
Dec 9, 2016
Procter & Gamble Hygiene and Health Care has announced the first quarter results of the financial year ended June 2017 (1QFY17). The company's sales rose by 12.5%YoY while net profit rose by 50.1% YoY during the quarter.
Nov 30, 2016
Nestle India declared results for the quarter ended September 2016. Here is our analysis of the result.
Nov 30, 2016
GSK Consumer Healthcare declared results for the quarter ended September 2016. The revenues dropped by 1.3% during the quarter as compared to a year ago; while the profits declined by 16.6% YoY during the quarter.
Nov 28, 2016
Marico has reported a flat topline while the bottomline has grown by 18% YoY during the quarter.
More Views on News
Aug 10, 2017
Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.
Aug 10, 2017
Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.
Aug 12, 2017
The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.
Aug 10, 2017
Bitcoin hits an all-time high, is there more upside left?
Aug 16, 2017
Ensure your financial Independence, and pledge to start the journey towards financial freedom today!
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. LEGAL DISCLAIMER:
Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here
. The performance data quoted represents past performance and does not guarantee future results.SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407