The fast moving consumer goods (FMCG) sector continues to remain out of favour with most funds. One reason for this is software.

Most fund managers have snubbed FMCG for the past several months. This is in stark contrast to last year, when FMCG was one of the pivotals of the golden triangle along with software and pharma. So while software continues to hog portfolios, the same cannot be said about FMCG, or for that matter even pharma.

Open-ended funds	Date of holding	% Holding	NAV (Rs)
Zurich(I) Capital Builder	31 Jul,2000	38.9	13.1
Sundaram Tax Saver 1997	31 Mar,1999	26.3	9.1
IDBI Equity Fund (Gr)	31 Mar,1999	24.1	12.0
Canpep91	31 Mar,2000	22.8	10.7
JM Equity Fund (Gr)	31 Jul,2000	21.0	11.9
Zurich(I) Tax Saver	31 Jul,2000	20.2	18.6
Zurich(I) Equity (Gr)	31 Jul,2000	19.7	21.3
DSP ML Equity Fund	31 Jul,2000	19.4	19.0
Canbonus	31 Jul,2000	15.1	10.2
Zurich (I) Top 200	31 Jul,2000	15.0	16.7

(The above table only shows diversified growth funds with over 15% exposure to FMCG)

FMCG allocations pale in comparison to those of software. And funds that have bought FMCG stocks have actually bought Hindustan Lever (the mother of defensive stocks) in a big way, ignoring most other FMCG stocks. This is more than apparent from the table below.

Open-ended funds	Date of holding	% Holding	NAV (Rs)
Canbonus	31 Jul,2000	13.3	10.2
Mastergrowth 1993	31 Mar,2000	13.1	19.6
Mastergain 1992	23 Feb,2000	12.6	12.0
Zurich(I) Capital Builder	31 Jul,2000	11.7	13.1
Zurich(I) Tax Saver	31 Jul,2000	11.6	18.6
Canpep91	31 Mar,2000	10.4	10.7
Zurich(I) Equity (Gr)	31 Jul,2000	10.2	21.3

(The above table only shows diversified growth funds with over 10% exposure to Hindustan Lever)

Why has FMCG been given the thumbs down by most funds? We asked this question to some prominent personalities from the mutual fund industry. Nikhil Khattau (CEO of Sun F&C Mutual Fund) had this to say: FMCG stocks have been ignored by the markets, and this has nothing to do with the sector per se. FMCG stocks are classic defensive stocks. So when the economy is doing well, you would not really look at them, and prefer growth stocks. However when the economy is on the downslide, FMCG stocks would witness some buying interest because of their defensive nature, whereby they rarely fall as sharply as other stocks in a falling market.

IDBI-PRINCIPAL's Chief Investment Officer (CIO) Rajat Jain opined, FMCG stocks have faced a perception problem vis-à-vis TMT stocks. The markets have tended to ignore these stocks in favour of the more aggressive TMT stocks, which have given over 100% returns in the past. I think investors must realise that it is not possible to get those kind of returns all the time, and FMCG stocks can also be rewarding

So are FMCG stocks victims of their own defensiveness? That's seems to the consensus right now But there cannot be any two opinions on the stabilising role that FMCG plays in a fund portfolio in the backdrop of a volatile market like the one we are witnessing currently. And for this alone, funds cannot afford to ignore it.

Add Comments