Friday, November 16, 2018
by
Indian Real Estate News
The consistent performance of FMCG mutual fund schemes over various time-frames have revived an old debate: Should regular investors opt for them? FMCG fund category has been consistently performing in one-, three-, five- and 10-year time periods. A recent report by Crisil said that the FMCG sector is likely to report 11-12 per cent rise in revenues in fiscal 2019, up 300-400 basis points from 8 per cent in fiscal 2018.
However, despite its consistent performance, most mutual fund advisors are not in favour of retail investors betting big on the sector. "FMCG funds are consistent but they are essentially sector schemes and fundamentally retail investors shouldn't have more than 10 per cent in their portfolio,
The FMCG sector has great prospects with rural consumption growing in India but investors need not bet on specific funds. FMCG sector is going to remain strong in India but the funds are meant to be a topping in your portfolio. During the low phase, they will give you consistent returns but in a bull run, you will miss the rally
The FMCG fund category has returned 21.78 per cent in the last one year, 16.73 per cent in three years, 16.61 per cent in five years and 19.46 per cent in the 10 year time frame. The Nifty FMCG Index has returned 12.83 per cent in the last one year, 12.16 per cent in three years and 10.57 per cent in five years. There are only two schemes investing in the FMCG sector in India: SBI Consumption Opportunities Fund (Erstwhile SBI FMCG Fund) and ICICI Prudential FMCG Fund. Both these schemes have been consistent performers in the long term.
Fast-moving consumer goods (FMCG) falls under the defensive sector category like pharma. Products that people use in their everyday lives come under FMCG sector. Coca-cola, ITC, HUL are some examples of FMCG companies. The FMCG sector is an important contributor to India's GDP growth, with a whopping size of around Rs 500 billion.
Mutual fund advisors believe that FMCG is a strong story in the coming time but why bet on specific sector funds when your fund manager can do that for you. "For small investors, adding more schemes doesn't make sense. If you are investing in a diversified fund, your fund manager is already adding the best sectors to your scheme portfolio. In a diversified fund your fund manager can change the allocation if a certain sector goes down.
You don't have that freedom in the sector scheme
However, you may opt for FMCG if you have deep pockets, say mutual fund advisors. If you have a huge corpus and you have already invested across market caps to meet you goals, you can add an FMCG scheme for consistent returns over years, they say. But if you are a small investor, you should opt for a diversified fund. Those who are betting on these schemes for diversification should get in with a horizon of minimum five years
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