FMCG funds are the chartbusters

3 funds give 71% returns in a year

FMCG sector funds have emerged winners among the various categories of equity funds. The bull run in consumer scrips is cited as the reason for their success.

Three FMGC funds, namely Prudential ICICI FMCG, Franklin FMCG and SBI Magnum Umbrella (FMCG), have given an average return of 71 per cent over the past one year. As against this, the market barometer Sensex gave a return of 47.94 per cent and the BSE FMCG index 56.94 per cent.

FMCG funds outperformed the FMCG index primarily because of lower allocation to Hindustan Lever (HLL), which was relatively an underperofrmer, fund managers said. Interestingly, none of the FMCG funds held HLL in their top holdings.

HLL is the second most prefered stock in the BSE FMCG index with a weightage of 30.64 per cent. ITC boasts the largest weightage at 49.02 per cent.

For the one-year period ending July 1, 2005, Prudential ICICI FMCG fund ruled the roost with 93.34 per cent growth in its net asset value (NAV). Franklin FMCG fund and the SBI Magnum FMCG fund displayed a growth of 62.51 per cent and 58.08 per cent, respectively.

Currently, Prudential ICICI FMCG has the largest corpus with nearly Rs 40 crore of assets under management.

Frankline FMCG manages about Rs 23 crore while SBI Magnum is still too tiny with assets worth just Rs 3.52 crore.

Clearly, hefty returns from these equity funds are due to the exponential growth in the stock prices of the major FMCG stocks "" Marico (94.97 per cent), Goodless Nerolac Paints (94.57 per cent), Tata Tea (92.63 per cent), ITC (85.38 per cent) and Dabur (78.38 per cent).

P G R Prasad, managing director, SBI Funds Managements, said: "The good returns are mainly due at the brilliant performance of the FMCG stocks in the past one year. Though this sector had a lot of problems in the past few years, the effort we put in picking the right performers paid off!"

Fund managers attributed the gains in the sector to the healthy growth of disposable income, both in the rural and urban markets.

The sound growth in the agricultural sector, the booming BPO and IT jobs and the robust economy had put substantial amounts in the pockets of the consumers.

A good start to the monsoon season, and certain other stock specific news have also driven FMCG counters.

Prashant Kothari, fund manager with Prudential ICICI, said: "The growth is not confined to the FMCG sector alone. Indian consumers have been active in various other sectors such as auto. We could attribute this to our ability at track the performing companies before the market recognises them. The trend clearly was from unorganised at organised players in this sector."

Based on the latest portfolio, Franklin FMCG Fund had 9.68 per cent of its net assets deployed in ITC, 8.48 per cent in Marico, 8.38 per cent in Nestle, 8.13 per cent in Tata Tea and 6.28 per cent in Goodless Nerolac Paints.

Prudential ICICI FMCG had Goodless Nerolac (11.97 per cent), Dabur (10 per cent), Gillette (8.84 per cent), Asian Paints (7.98 per cent) and Godrej Consumer Products (7.8 per cent) as its top holdings.

Similarly, SBI Magnum has ITC (14.53 per cent), Dabur (12.42), Tata Tea (10.91), Bluedart (10.22 per cent) and Asian Paints (9.83 per cent) as its top holdings.

Prudential ICICI FMCG has no exposure to HLL while Magnum FMCG had 7.9 per cent and Franklin FMCG had 2.18 per cent of their net assets in the FMCG major.