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The fourth-largest sector in the country is India\’s FMCG sector. FMCG stands for ‘fast-moving consumer goods’ and includes everything from hygiene products like soaps and shampoos, to grocery foods like packaged nuts and chips. In the last few years, rural India has seen a surge in FMCG product use, with 50% of total spending ascribed to FMCG alone. Here’s everything you need to know about India’s FMCG stocks in the share market.
What exactly is FMCG?
Due to their low shelf life, ‘Fast-Moving Consumer Goods’ classify as ‘non-durable goods. Any service or product created for the end goal of being utilized directly by the end-user is a ‘consumer good’. Consumer goods are broken down into three sub-categories. They are:
Non-Durable Goods (shelf life of <1 year)
Durable Goods (shelf life of 3+ years)
Additional Consumer-Related Services
In short, FMCG goods are bought and sold quickly so their price reflects the same by being inexpensive. Due to their high turnover rate and perishability, FMCG goods see extraordinary demand from consumers. One way to think about FMCG is that a household cannot function without them. Baked goods, office supplies, toiletries, fruits, and veggies, over the counter medication, cleaning supplies, and more fall under this essential sector.
Types of FMCG Stocks on India’s Share Market
Since they are currently the fourth largest industrial sector in India, FMCG stocks in India can be a lucrative investment in the stock market. The competition among stocks on the share market is high due to the fast turnover rate. While the stocks have lower profit margins, since COVID-19 has resulted in countrywide lockdown, FMCG has seen a surge in demand. They continue to count for 50% of all consumer spending within the country. When it comes to FMCG stocks, there are large, mid and small-cap types of FMCG stocks.
Here is a small distinction between the three types of stocks according to the securities and exchange board of India (SEBI).
Large-cap FMCG stocks are usually stocks from large-cap companies such as P&G, Tata Consumer Goods, Unilever, and more. Such companies are ranked between 1 to 100 with respect to their market capitalization in India. On the stock market, large-cap stocks are popular, from well-established companies, offer low volatility, and comparatively stable returns.
Similarly, mid cap stocks arise from mid cap companies. Mid cap companies are ranked between 101 to 250 based on their market capitalization, as per SEBI. Compared to large-cap stocks, using your demat account to trade mid-cap stocks is slightly more high risk due to higher amounts of volatility. However, mid-cap stocks have the potential to grow quickly leading to high returns.
Finally, small-cap stocks are the shares from small-cap companies that are ranked with regards to their market capitalization as 250th onwards in India. Small-cap stocks are the most volatile out of the three types but they also have the potential to grow the most. They may be sought after by angel investors who become early bird shareholders in a small-cap stock that could be huge in the foreseeable future.
Popular FMCG Stocks in India.
1. Hindustan Unilever
In the world of FMCG, Hindustan Unilever continues to dominate with a market cap of ₹487,515.68. HUL deals in all kinds of nondurable consumer goods by launching as well as acquiring brands in all kinds of niches. They have acquired 35 different Indian FMCG brands like Dove, Closeup, Lifebuoy, Knorr, Sunsilk, Lakme, Lakme, Sunsilk, Axe, and Surf Excel to name a few. At the beginning of 2005, a stock market share in HUL was valued at just ₹150. Around 15 years later, the stock market shares now cost ₹2,250 per holding.
2. Dabur India Ltd.
Dabur India Private Limited whose market capitalization is currently at ₹78,873.73 crores is a large-cap FMCG company. While there are ups and downs each week, the long-term pattern shows that the stock for Dabur has grown steadily in the last 5 years. Popular goods manufactured by Dabur Ltd. are their Dabur Chyawanprash supplement, Pudinhara and other digestive aids, and hair care products such as their Amla oil.
3. Nestle India
With a market valuation of ₹1,57,646.93 crores, Nestle is likened to HUL as a large scale FMCG conglomerate. Nestle owns a host of brands as well such as Kit Kat, Maggi, Milky Bar, Milkmaid, Bar-One, and Nescafe of course. Its stocks seem to be rising steadily since the past few years, and the P/E ratio of 85.73 reflects sharp projected growth for Nestle.