FMCG to remain pricey for a long time despite coronavirus outbreak

Amidst growth concerns in other sectors, better earning visibility and cash surplus position provide comfort

At a time when most sections of the market are bearing the brunt of Covid-19, the fast-moving consumer goods (FMCG) sector, too, has witnessed a correction in valuation to its 5-year mean.

However, the sector is still trading at a 115-per-cent premium to the frontline indices. Over the last month, the Nifty FMCG index, which has been flat, has outperformed the Nifty, which has declined over 16 per cent.  The price-to-earnings (P/E) valuation of the FMCG index, at almost 29x, is among the highest within sectoral indices. If analysts are to be believed, FMCG’s valuation premium vis-à-vis leading indices will continue