Consumer Stocks Underperform But Only In Short Term

FMCG and consumer stocks have underperformed benchmark indices year-to-date. However, Karan Bhojwani finds out that they are fabulous long term bets for patient investors

- Karan Bhojwani

India has lost the tag of being “fastest-growing economy in the world” for the past several quarters. From a peak of 8 per cent, GDP growth recently nearly halved to 4.5 per cent in September 2019 quarter (Q2FY20): slowest growth in six years. This along with 45-year high unemployment rate is a serious concern for quite some time.

On the contrary, Indian equity market is soaring with key benchmark indices making all-time highs. Sensex managed to close above 41000 for the first time on 29th November. Many market experts said that the market has already discounted the sluggish economic growth and hence the exuberance.

Various sector stocks are showing signs of recovery. Nifty 50 is up by nearly 1.2 per cent in November while Nifty realty, Nifty PSU, Nifty Metal, Nifty Services, Nifty Bank and Nifty Pharma are up by 3.2 per cent, 4.1 per cent, 2.5 per cent, 2.8 per cent, 4.7 per cent and 2 per cent respectively. The synchronised rally in the beleaguered sectors is a sign of sectors bottoming out.

On the other hand, consumer (automobile, healthcare, textiles, aviation) and FMCG stocks are showing signs of underperformance. Nifty FMCG and Nifty consumption is down 4.8 per cent and 3.2 percent respectively.