ICICI Prudential FMCG ETF: Low-cost route to play day to day consumption

The fund joins a growing list of a dozen dedicated consumption oriented equity schemes

Staff Writer   /   July 22, 2021

ICICI Prudential Mutual Fund has launched an NFO for the FMCG sector. The NFO opened on July 20, 2021, and will close on August 2, 2021. With rising income levels, urbanization, digitization, and changing consumer behavior, the FMCG industry remains a key sector for investors. ICICI Prudential FMCG ETF will allow the investors to gain exposure to a diversified portfolio of companies in the consumer goods sector at a fraction of cost with a minimum investment of as low as Rs 1000. Read on to know more.

Key highlights

ICICI Prudential FMCG ETF is an open-ended Index ETF tracking the Nifty FMCG Index, comprising 15 stocks from the FMCG sector listed on the NSE.

The new ETF provides investors with a choice to take exposure to multiple facets of the FMCG sector through this product.

It will provide exposure to leading companies forming part of the 4th largest sector in the Indian economy – FMCG.

The ETF or exchange traded fund route is suitable for investors looking to gain exposure from the growing FMCG sector.

The minimum investment during NFO required is Rs 1,000.

Why FMCG

FMCG is the 4th largest sector in the Indian Economy. India’s FMCG market was valued at USD 110 billion in 2020. In less than a decade, the market size of the sector
had tripled. By 2025, the market is expected to grow to USD 220 billion (Source: www.ibef.org).

Sector fortunes

The FMCG sector witnessed a high growth quarter on the back of lower sales in the base quarter, which was marred by country wise strict lockdown. Though Q1FY22 also witnessed the adverse impact of a second Covid-19 wave & subsequent state wise lockdowns, the impact on supply chain was minimal with industry, government & trade channel’s preparedness. Similar to previous lockdowns, consumption of some discretionary & out of home categories were adversely impacted.

Experts believe detergent, cosmetics, skin care products, juices, carbonated drinks would have seen muted sales during the quarter. On the other hand, packaged foods, edible oil, nutrition, immunity products would have continued the strong growth momentum. With the sharp increase in many commodity prices, most companies have taken price hikes to the tune of 5-20% in the last six months. After the one full year of aggressive new launches, the pace of new product development has de-accelerated. Top FMCG firms include Dabur, HUL, Nestlé & Zydus Wellness, Marico, ITC & VST Industries.

About Nifty FMCG

The NIFTY FMCG Index is designed to reflect the behaviour and performance of FMCGs (Fast Moving Consumer Goods) which are non-durable, mass consumption products and available off the shelf. The NIFTY FMCG Index comprises 15 stocks from the FMCG sector listed on the National Stock Exchange (NSE). This index has outperformed Nifty 50 index in 8 out of the last 11 calendar years. (Source: MFI Explorer, Data as of June 30, 2021).

Fund peers

There are at least 12 consumption oriented equity funds. The biggest among them is ABSL India GenNext, Mirae Asset Great Consumer, Sundaram Rural & Consumption, Tata India Consumer and BNP Paribas India Consumption. The only FMCG focussed product in thematic funds is ICICI Prudential FMCG Fund.

Fund-house speak

Nimesh Shah, MD & CEO, ICICI Prudential AMC said, “ICICI Prudential FMCG ETF provides exposure to a basket of securities in the FMCG sector. Higher inclination towards branded products, rising purchasing power owing to higher disposable income, increased digitization and growing demand from rural areas, are expected to fuel the FMCG sector growth in India. One can say that this sector approximately accounts for more than half of consumer spending.”

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