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Equity funds scaling up FMCG holdings

Nilanjan Dey

Kolkata , June 8

DIVERSIFIED equity funds seem to be turning overweight on the FMCG sector in a bid to outdo each other. The trend is an offshoot of the superior performance that select FMCG stocks have delivered lately.

A number of funds are known to have already scaled up their FMCG holdings in recent times, while others are considering such a measure, indicate investors who have been watching the sector from close quarters. Their move is triggered by hopes of further upside in these stocks as well as some of the others.

The past year has seen a series of price spurts on the FMCG front, with stocks such as ITC, Gillette, Dabur, Asian Paints and Tata Tea doing particularly well.

Many of these - Asian Paints and Tata Tea are good examples - are currently quoting near their 52-week highs. ITC, the cigarette major that is fast entering businesses such as foods and agarbattis, is the leader of the pack, given its yearly low and high at Rs 812 and Rs 1,614 respectively. ITC, incidentally, closed at Rs 1,580.90 on Wednesday on the NSE.

"Counters such as these figure among the top holdings of the FMCG funds," said Mr Shyam Bhat of Principal MF, agreeing with the view that many professional investors are closely following their movements these days. What is interesting for him is the positive turnaround recorded by the sector in recent times - a development that is reflected in changing attitudes of investors towards the stocks concerned.

For the record, FMCG funds - there are three of them managed by Franklin Templeton, SBI and Prudential ICICI - have each posted smart gains in the past year. With their average returns at more than 65 per cent (as on June 7), these funds have outperformed all other categories of equity schemes.

Mr Nilesh Shah, President of Kotak Mahindra MF, felt that "the recent performance of a number of FMCG stocks has proved once again that investors should wait patiently for opportunities to come their way." He was referring to the fact that money invested in some of these stocks would have doubled by now.

Dabur, for instance, was quoting at around Rs 60 not long ago and had peaked at Rs 145. On Wednesday, it closed at Rs 131.75 on the NSE

Tata Tea, a serious player in the packet tea segment, has seen its stock range between Rs 251 and Rs 607 during the past year. It is now quoting at Rs 598.45.

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