FMCG players with higher dependence on one or 2 categories more vulnerable

Competitive intensity, downtrading, and demand slowdown likely to hurt performance and valuations

At a time when most sectors, such as banking, automobile, and hospitality, are struggling to regain investor trust, fast-moving consumer goods (FMCG) stocks are enjoying strong support. After losing 23 per cent during January to March 23 (before the imposition of the lockdown), the Nifty FMCG index has bounced back sharply by 26 per cent. In simpler words, it may be about 7 per cent off its January highs, but the Nifty50 is 18 per cent lower during this period.

Though the defensive nature of the business has kept the ball rolling for FMCG stocks, investors should be cognizant of