"We are positive on FMCG sector"

Sivasubramanian KN, CIO- equity, Franklin Templeton

The main focus of our strategy has been to identify companies that can sustain growth and profitability.

We look for companies that provide consistently high return on capital employed (RoCE), have a diversified product range with good brand equity, a broad product line with products aimed at the mass market and a presence in the high-margin premium segment as well apart from having good distribution and market reach with increasing penetration in rural areas.

The fund has been increasing its allocation to mid and small-caps. What is the rationale behind this strategy?

The main reasons are the limited investible universe available in the sector and the fact that smaller players are exhibiting relatively higher growth.

Some of these companies are concentrating on efficiencies and better supply chains. Since they have smaller focused portfolios, they are able to adapt faster to market situations and grow even in a tough environment.

What is the outlook on FMCG sector?

The cyclical recovery in the sector appears to be underway with a combination of increasing incomes, improved marketing and innovation by companies and better price-value equation.

We believe that future growth in the sector will be dependent on two structural drivers "� increasing penetration and consumption in rural areas and catering to the changing aspirational values of the urban markets.