There are 2 types of investors. One who invests when markets are rising and another who invests in anticipation that markets would rise in future. The later one would get benefitted with higher returns. One such sector is investing in FMCG Sector. With GST Implementation, FMCG Sector is expected to boost the profits. Why should you invest in this FMCG Sector in 2017? Which are the best FMCG Mutual Funds to invest in 2017? Should you invest in FMCG Sector funds for short term, medium term or long term?
What is FMCG Sector?
FMCG termed as Fast Moving Consumer Goods.
As per Wikipedia, Fast-moving consumer goods (FMCG) or consumer packaged goods (CPG) are products that are sold quickly and at relatively low cost. Examples include non-durable goods such as soft drinks, toiletries, over-the-counter drugs, processed foods and many other consumables.
Basically, these are regular products which we use or consume on daily or regular basis.
Which are the leading FMCG Companies in India?
There are several leading FMCG companies in India. To name a few, ITC, Colgate Palmolive, VST Industries, Dabur, EID Parry, Hindustan Uniliver Limited (HUL) etc.,
Reasons that FMCG Sector is expected to grow in coming years
GST Council has finalized the 4-Tier Tax Structure. Analysts believe that FMCG stocks do well in coming years. Major segments including Personal Care, house hold items including Toothpaste, detergents, dishwash, shampoo, soaps etc., fall under 18% slab. This would boost FMCG company profits that produce these products. Many FMCG companies produce products like detergent, soaps, oil, creams etc., which would benefit tax benefit upto 9% (earlier 27% Vs current upto 18%).
Last week, 5-Rate Tax structure was unveiled on 3rd November, 2016. This would bring economic reform in India. The tax structure includes 0%, 5%, 12%, 18% and 28%. Govt. of India proposed to keep 12% and 18% standard tax rates for the majority of the items used by common man like personal care and household items.
Tobacco products attract higher rate of 28% apart from cess compared to their earlier tax of 40%. This is positive for ITC and VST companies.
Best FMCG Mutual Funds to invest in 2017
a) SBI FMCG Mutual fund Scheme
SBI FMGC Mutual fund invests in FMCG Companies in India.
AUM of this fund is Rs 273 Crores.
It has given annualized returns of 13% in 1 year, 17% in 3 years and 20% in 5 years and 19% in last 10 years. Since launch it posted 15% annualized returns.
Top holdings of the company are ITC, Nestle India, Greenply Inds, Jubilent Foodworks.
If you have invested Rs 1,000 per month for last 5 years, your investment would have been Rs 60,000 and your investment value would have grown to Rs 90,000.
b) ICICI Pru FMCG Mutual fund Scheme
ICICI FMGC Mutual fund invests in FMCG Companies in India.
AUM of this fund is Rs 282 Crores.
It has given annualized returns of 12% in 1 year, 16% in 3 years and 17% in 5 years and 16% in last 10 years. Since launch it posted 17.7% annualized returns.
Top holdings of the company are ITC, Manpasand, Jubilent Foodworks, Hindustan Unilever, Britania industries, Pidilite etc.,
If you have invested Rs 1,000 per month for last 5 years, your investment would have been Rs 60,000 and your investment value would have grown to Rs 87,000.
First impression of GST is positive. With the implementation of GST, system would improve in terms of logistics. Due to this, stocks like HUL, Colgate, Dabur, Jyothi Labs, ITC, VST Industries etc., would improve its profits.
Also Read: Top 10 SIP Mutual Funds to invest now
Conclusion: FMCG Sector is expected to boost in coming years with new GST implementation. Some of the stock prices already increased and such GST implementation benefits already factored in current stock prices. However, I believe that there is more scope for getting higher returns from FMCG Stocks. However, instead of investing in individual stocks, you can invest in FMCG Mutual funds which can help you to get higher returns from such GST Implementation from next year. These are sector funds, hence not recommended for long term. You should invest in such funds for next 2-3 years time frame to get 15% to 20% annualized returns.
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Best FMCG Mutual Funds to invest for 2017
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