Why foreign investors prefer FMCG companies

Enthused by robust financial performance and attractive valuations, foreign investors increased their exposure to fast-moving consumer goods (FMCG) companies such as Britannia, Hindustan Unilever and Godrej Consumers Products in April-June this year.

Most of the foreign entities sell or purchase Indian stocks through FII route and the data showed that only five of the 16 large FMCG companies have witnessed a decline in their FII holding in the April-June quarter over the preceding January-March quarter.

[caption id=“attachment_413809” align=“alignleft” width=“380”]  Foreign institutional investors’ (FII) holding has increased in 11 consumer goods firms during this period. Reuters[/caption]

Foreign institutional investors’ (FII) holding has increased in 11 consumer goods firms during this period, according to a report by A C Choksi Share Brokers. Domestic institutional investors, on the other hand, raised their holdings in seven companies and reduced stake in the remaining nine stocks during the March quarter.

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“FIIs are primarily betting on Large Caps while DIIs are positive on Mid Caps in the sector,” the brokerage firm noted. FII holding in Britannia, Jyothy Laboratories, Hindustan Unilever and Godrej Consumers Products increased by more than a percentage point.

However, they reduced ownership in United Spirits, GSK Consumer Healthcare, Dabur, Emami and Nestle in the quarter. Besides, FIIs increased stakes in ITC, Marico, Bajaj Corp, Colgate, Zydus Wellness, Asian Paints, Berger Paints during the June quarter.

Experts believe that FIIs have been showing interest in the Indian FMCG companies due to their defensive appeal and attractive valuation.

“FIIs are betting on FMCG stocks because of defensive appeal and these stocks are performing well on earnings front. Another major reason for hike in FIIs ownership FMCG stocks was that these stocks are available at good price,” Destimoney Securities MD and CEO Sudip Bandyopadhyay said.

Overall, FIIs stayed away with Indian equity market during April-June quarter and pulled out Rs 1,957 crore, after a net investment of nearly Rs 44,000 crore in the preceding quarter (January-March). The BSE benchmark’s Sensex rose by a marginal 26 points to close at 17,430 points on 29 June.

Interestingly, over the past 12 months, FIIs have increased their positions in all the stocks other than Marico, Jyothy Labs, Dabur, United Spirits and Zydus Wellness. On the contrary, DIIs have been reducing positions in consumer stocks except in Marico, Emami, Jyothy Labs, Dabur and United Spirits over the past 12 months.

PTI