The Fast Moving Consumer Goods (FMCG) sector is booming and is set to cross $220 billion by 2025 from the current market size of $110 billion growing at a 14 percent CAGR (Compound Annual Growth Rate), according to a report by ICICI Prudential Asset Management Company.
More than half of the household consumer spending comes towards the FMCG sector. Deepened internet penetration and e-commerce success, the report said, have led FMCG players to partner with major e-commerce platforms, serving demand digitally.
As per ICICI Prudential Asset Management Company, COVID-19 too has accelerated the e-commerce adaption by at least 2-3 years.
"Growing awareness for branded products, increased spending power, ease of access, and changing lifestyles have been the major growth drivers for this sector," the report said.
Given the situation, it’s not wrong to say that investors can benefit from this increasing traction in the space.
They can do this, according to Chintan Haria, head – product development and strategy at ICICI Prudential Asset Management Company, by direct investing in FMCG stocks.
"This will require identification of appropriate companies that are worth investing in. However, this may need intensive research and financial and sector understanding with the knowledge of when to enter and exit the stock,” Haria said.
Another option is to invest through ETFs.
"Investing via ETFs can help in tracking the NIFTY FMCG Index comprising of leading stocks from the sector listed on NSE. NIFTY FMCG TRI has given an outstanding CAGR of 14.9 percent in the 10 years beating the Nifty 50 returns," added Haria.
"Thus, investors who may not have the knowledge or time to go for direct investment can comfortably choose to invest through FMCG ETF, gaining exposure to 15 FMCG companies with a capital requirement of as low as Rs 500," he mentioned.
Pankaj Mathpal, founder and managing director, Optima Money Managers Pvt Ltd also considers FMCG as evergreen and a defensive play. He believes that investing through a low-cost FMCG ETF can be the easiest way to be a part of this growth story.
"Through an FMCG ETF, an investor gets the opportunity to take exposure to a basket of sector leaders' stocks in an easy and efficient manner," Mathpal said.
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