Can FMCG Be A Go-To Sector In The Medium Term?
Dalal Street Investment Journal|July 18, 2022
India's FMCG industry continues to be one of the biggest long-term sustainable business opportunities in the country. However, despite being one of the fastest growing markets globally for FMCG products, India's per capita FMCG consumption is still amongst the lowest in the world. Armaan Madhani sheds light on the sector's strong scope for growth in the near future
Armaan Madhani
Can FMCG Be A Go-To Sector In The Medium Term?

Over the last three trading weeks i.e. from June 20 to July 8, 2022, the BSE FMCG index gained traction to significantly outperform the broader markets. The sectoral index recorded more than double the gains of the BSE Sensex, captivating the attention of investors. Godrej Consumer Products, Hindustan Unilever, Britannia, and Emami posted high-teen returns. The FMCG sector is the fourth-largest sector in the country and is growing at an unprecedented rate. The sector is expected to increase at a CAGR of 14.9 per cent to reach USD 220 billion by 2025 from USD 110 billion in 2020. Growing awareness, easier access, and changing lifestyles have been the key growth drivers for the sector.

In FY22, the sector witnessed moderation in growth mainly due to subdued demand conditions, especially in rural markets, high inflation eating into household budgets, and the high base effect in certain categories. The year also saw an abnormal increase in prices of key inputs which exerted considerable pressure on profit margins. After a rather toilsome FY22, it seems like India’s FMCG sector could be in the course of getting its mojo back. Let us delve deeper to obtain a better understanding of the sector’s macro growth trends in Q4FY22, the outlook for Q1FY23, emerging green shoots, and factors that make FMCG an ideal candidate for investors as a go-to sector in the medium term.

Macro Growth Trends in Q4FY22

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