The fast-moving consumer goods (FMCG) sector is one of the most important sectors in the Indian economy. It accounts for a significant share of the country’s GDP and employs millions of people. The FMCG sector is also a major contributor to the Indian government’s tax revenue.
The FMCG sector is expected to continue to grow in the coming years. This is due to a number of factors, including the growing population, rising incomes, and changing lifestyles. The FMCG sector is also expected to benefit from the government’s initiatives to improve the ease of doing business in India. The FMCG stocks are among the dominant sectors on many stock exchanges.
For investors interested in exploring FMCG stocks on NSE, we have put together some of the top stocks to consider.
What is the FMCG Sector?
FMCG sector or the Fast Moving Consumer Goods Sector is one of the prime sectors of our country. It is the fourth largest sector of our economy and represents the demand for various consumer goods in India. This sector boasts of having many key conglomerates and stalwarts of the Indian economy that have created a demand for their products not only nationally but also on an international level. Investment in FMCG stocks is also considered to be evergreen as whether in recession or boom, the demand for basic consumer goods is never going to die. However, it is important to invest in quality stocks from the industry to assure the security of one’s investment as well as growth.
What are the key segments of FMCG stocks?
When we talk about the FMCG sector it includes a variety of consumer goods. It is a huge industry that is essentially divided into three main categories and segments. The details of these segments are mentioned below.
a. F&B
The Food and Beverage (F&B) segment of the FMCG sector includes an ocean of commodities like health drinks, staples, snacks, chocolates, fruits and vegetables, dairy products, bakery products, branded food products, processed food products, meat, poultry, seafood, bottled water, ice, sugar, confectionery, grains, flour, etc. This industry is quite fragmented and has a number of players but no single company can be considered to have a monopoly or direct the share prices. The driving force for demand and supply of goods in this segment is the demographic of the area, the consumption pattern, and the competition.
b. Healthcare
Healthcare is the second segment of the FMCG sector. This segment includes OTC (Over The Counter) products or medicines as well as any other kind of medicines or equipment that can be needed for the treatment of any ailments. This segment accounts for almost 31% of the FMCG industry making it the second-largest segment. This is a prime sector in the country and has a huge public and private partnership to solve the various health issues of the country. The healthcare industry is expected to grow at a CAGR of 16-17% approximately.
c. Household & Personal Care
The final category or segment of the FMCG sector is the household and personal care segment. This is the largest segment of the FMCG industry and accounts for 50% of the total sector. This sector includes a huge range of products like oral care, skincare, cosmetics, hair care, deodorants, perfumes, paper products, feminine hygiene, cleaning products, etc.
How to pick top stocks from the FMCG sector?
Investment in FMCG stocks like any other stock requires thorough research and analysis. Investors and traders need to take the help of various tools and techniques of technical and fundamental analysis to pick the best stocks in the industry and ultimately increase their wealth. Some of the basic pointers to understand while picking stocks from the FMCG sector are discussed below.
a. Market share of the company and brand value
One of the first things to look out for is the name of the company and its brand value. It is also equally important to know the market share of the company in the industry to know its relative position. This will also be an indicator of the customer base and their faith in the company. Investing in such shares can give the investors potentially good returns in the form of dividends or capital gains.
b. Diversified products
A company having a wide range of products belonging to the FMCG sector is usually better for investors and shareholders. This helps them tide over in case one of the segments or sub-segments are underperforming. The diversification of the business helps the investors and shareholders reduce their losses at the same time spread their risk.
c. Sound distribution network and supply chain management
The key to every successful company in the FMCG industry is having a strong distribution network as well as a sound supply chain. The importance of these factors was established clearly during the pandemic related lockdowns when consumers were struggling to get basic essentials. Hence, it is important for the company to have a strong supply chain so the production of the goods is not hampered as well as a widespread distribution network so they can reach the desired customers on a timely basis.
d. Strong business model and financial statements of the past 3-5 years
It is equally important for the investors and shareholders to focus on the fundamentals of the company. A company with strong fundamentals can easily tide over the short-term market volatility and sustain in the long term. Hence, it is
important for the investors and shareholders to track the performance of the company for the past 3 to 5 years approximately.
Top FMCG Stocks in India listed on NSE
There are multiple FMCG stocks that are traded on the NSE (National Stock Exchange). Some of the top stocks that are traded on NSE and their details are given below.
a. Hindustan Unilever
HUL is a very well-known name in the Indian FMCG market. A few key details of this industry giant are tabled below.
| Category | Details |
| Name | Hindustan Unilever Limited |
| Chairman | Mr. Sanjiv Mehta |
| Incorporated | 1933 |
| Business | Manufacturer of soaps & other personal care items |
| Share Price | Rs. 2307.85 |
| PE Ratio | 64.32 |
| PB Ratio | 11.27 |
| Dividend Yield | 1.76% |
| ROE (TTM) | 17.59% |
b. Dabur
Dabur is a huge company that has a diverse range of products from the FMCG category. The key details of this company are mentioned below.
| Category | Details |
| Name | Dabur India Limited |
| Chairman | Mr. Amit Burman |
| Incorporated | 1975 |
| Business | Manufacturer of soaps and detergents, perfumes and toilet preparations, cleaning and polishing preparations |
| Share Price | Rs. 569.70 |
| PE Ratio | 55.63 |
| PB Ratio | 12.38 |
| Dividend Yield | 0.83% |
| ROE (TTM) | 24.14% |
c. Nestle
Nestle is one of the largest food companies in the world when measured in terms of revenue or other parameters. The company is a Swiss conglomerate having a worldwide presence. The key details of the company are tabled below.
| Category | Details |
| Name | Nestle India Limited |
| Chairman | Mr. Suresh Narayanan |
| Incorporated | 1959 |
| Business | Manufacturer of soaps and detergents, perfumes and toilet preparations, cleaning, and polishing preparations |
| Share Price | Rs. 19288.40 |
| PE Ratio | 82.90 |
| PB Ratio | 65.09 |
| Dividend Yield | 1.04% |
| ROE (TTM) | 105.31% |
d. Marico
Marico is an Indian Multinational Consumer Goods company having its headquarters in Mumbai and a presence in over 25 countries. The key details of this FMCG giant are mentioned below.
| Category | Details |
| Name | Marico Limited |
| Chairman | Mr. Harsh Mariwala |
| Incorporated | 1988 |
| Business | Manufacturer of vegetable oils and fats and owns various brands in hair care, skincare, edible oils, health foods, male grooming, and fabric care. |
| Share Price | Rs. 509.90 |
| PE Ratio | 55.32 |
| PB Ratio | 16.68 |
| Dividend Yield | 1.47% |
| ROE (TTM) | 33.97% |
e. Colgate-Palmolive
Colgate-Palmolive is an American multinational company. The details of this company are tabled below.
| Category | Details |
| Name | Colgate-Palmolive (India) Limited |
| Chairman | Mr. Mukul Deoras |
| Incorporated | 1937 |
| Business | Manufacturer of oral and dental hygiene (toothpaste, toothpowder, mouthwash, oral, perfumes, etc.) |
| Share Price | Rs. 1468.60 |
| PE Ratio | 37.66 |
| PB Ratio | 24.01 |
| Dividend Yield | 2.58% |
| ROE (TTM) | 75.11% |
Risk factors and considerations for investing in FMCG stocks
Here are some of the risk factors and considerations for investing in FMCG stocks in India:
- Economic factors: The FMCG sector is sensitive to economic conditions. A slowdown in the economy can lead to lower demand for FMCG products.
- Competition: The FMCG sector is a competitive market. There are a number of large and well-established companies operating in the sector.
- Regulations: The FMCG sector is subject to a number of regulations. These regulations can change over time, which can impact the profitability of FMCG companies.
- Changing consumer preferences: Consumer preferences can change over time. This can impact the demand for FMCG products.
Conclusion
Overall, FMCG is considered to be one of the shock-proof sectors of any economy as the demand for necessities never tends to die. Considering that there are many stocks from this sector that are listed on the NSE, investors can have a wide range of choice to pick from. Depending on individual risk appetite and investing goals, investors can consider the stocks mentioned in this blog to be included in their portfolio.
FAQs
Some of the key advantages of the FMCG sector in India are growing demand, increased investments, increased purchasing power especially in rural areas, government support, and increased e-commerce and organized market.
The average share or contribution of the urban sector in the FMCG sector is 55% approximately. The balance of 45% makes up the rural sector.
Some other FMCG giants having their stocks listed on NSE are Brittania, Godrej Consumer Products, Tata Consumer Products, ITC, Emami Limited, etc.
Apart from the increase of FMCG market share in the rural areas, the increase in the purchasing power of the average Indian has also opened a new market for premium and branded products from across the world. This has helped many international FMCG giants gain a foothold in India.
