Top FMCG Stocks in India

FMCG sector in India is the largest industry in the world. It is estimated that FMCG accounts for around 15% of the GDP and employs more than 10 million people in India. The FMCG sector has been growing at a rapid pace over the years due to increasing urbanization, rising middle-class population, changing lifestyles, and increasing disposable incomes among consumers. The growth of this sector is driven by a number of factors, including increasing consumer spending power, changing lifestyles, and rising disposable income levels.

It is also one of the most attractive sectors for investors as it has high growth potential with low competition. Some of the major players in this sector include Hindustan Unilever Ltd, Dabur, Nestle etc.

The industry is experiencing a shift from traditional grocery stores to modern retail stores such as hypermarkets, supermarkets, and convenience stores due to rapid urbanization and increasing disposable income levels among consumers. In addition, consumers are increasingly opting for online shopping instead of visiting traditional grocery stores due to the convenience factor associated with it and its low-cost nature compared to offline shopping options such as supermarkets or hypermarkets.

List of the Best FMCG Stocks in India 2023

Factors to Consider Before Buying the Best FMCG Stocks

With so many companies in the FMCG space, it can be difficult to know which are the best stocks to buy now. There are a variety of factors that investors should consider when deciding which FMCGs to invest in and how much money they should invest. Some of them are listed below-

1. Future Growth Potential

This is one of the most important factors to consider while picking stocks. One should look for companies that have a high potential for future growth, as this would help the company to generate higher profits in the future and thereby increase its share price.

2. Current Financial Performance

It is also important to look at the current financial performance of a company before investing in it. One should look at the company’s revenue, profit margins, and other metrics such as return on equity before investing in a company. If a company has low revenue but high-profit margins then it may be worth investing in that stock, as it will have good prospects for future growth. 

If a company has been increasing its revenue by 20% per year for the past three years, this is a good sign that it will continue doing so for some time. If a company has been decreasing its revenue by 5% per year for three years, this might be an indication that it is struggling financially or might not have enough resources available to grow at an acceptable rate.

3. Valuation Ratios

Valuation ratios can also be used to determine whether a stock is undervalued or overvalued at any given point in time, which can help investors identify good value buying opportunities during market downturns or sell-offs when prices drop significantly below intrinsic value levels due to temporary market conditions such as economic recessionary cycles or investor panic selling pressure caused by unexpected events such as major news announcements.

4. Product Portfolio Diversity

The first factor to consider is diversity in the product portfolio. FMCG companies should have products that are differentiated from each other and have strong brand equity. This will give them an edge over other companies in the same industry.

5. Equity and Market Share

Brand equity and market share are two important factors that determine if a company can sustain its growth rate in the long term. A company should have a good brand image among its target audience and should also be able to maintain its market share over time. Any company needs to focus on building customer loyalty so that they can retain their customers even during bad times.

6. Distribution Network

A strong distribution network is important for any business because it helps them reach out to more customers easily and quickly which increases sales in turn resulting in higher profits as well as increased market share for the company at large which gives them more leverage when negotiating prices with suppliers and other stakeholders involved with running their business successfully without any hiccups whatsoever.

7. Supply Chain Management

It refers to the process of managing raw materials through manufacturing processes until they reach end-users who consume them or use them up completely. A company must ensure that its supply chain remains efficient to ensure that there is no shortage of raw materials or finished products. 

India’s Top FMCG Stocks’ Performance

Note: The list comprises 5 top FMCG stocks in India with the highest market capitalization as of February 18, 2023. The list is in descending (high to low) order of market capitalization. 

1. HUL

Hindustan Unilever was founded in 1933.  It is a leading consumer goods company and one of the largest marketing companies in India. The company’s products are available in more than 150 countries, with a portfolio of over 400 brands. The company operates through three business segments: Personal Care, Home Care, and Refreshment. Currently, the company ranks among the largest consumer goods companies in the world with sales exceeding $60 billion annually across 150 countries worldwide.

2. ITC

ITC has been on the list of top FMCG stocks in India for the past few years. ITC (Indian Tobacco Company) is a leading FMCG company in India. The company was incorporated in India in 1910. While cigarettes are its main product line, ITC has products in other categories as well. Some of its other popular products include Aashirwad Atta, Bingo Chips, Fiama, Savlon, Vivel, Classmate Stationery, Sunfeast Yippee!, Bingo, etc

3. Nestle

Nestle is also amongst the best FMCG stocks in India in terms of 5-year returns. Nestle India has grown exponentially over the years. It is a leading brand in the FMCG space and offers a wide range of products including water, coffee, tea, food, and more. The company’s business is divided into four categories: Beverages, which includes water and carbonated soft drinks; Chocolate and Confectionery, which includes chocolate confectionery products; Nutrition, Health & Wellness, which includes infant nutrition products; and Petcare.

4. Dabur

Dabur started in 1884 as a health care products manufacturer in Kolkata. Dabur India is engaged in the manufacturing and marketing of pharmaceuticals, Ayurvedic products, personal care, and food products. It is one of the largest companies in the FMCG sector in India with a market share of 5.5%.

5. Godrej Consumer Products

Godrej Consumer Products is a leader in the FMCG sector. The company’s products include soaps, detergents, food products, health care products, personal care products, and home appliances. Godrej Consumer Products has a strong presence in the Indian market and is expanding its operations to other emerging markets such as Africa and South America.

Conclusion

The FMCG market is growing at a rapid pace. The sector is currently witnessing a shift in the nature of demand and supply. Consumers are now more demanding and willing to spend on quality products rather than quantity. The demand for branded products is increasing, which has led to the growth of the FMCG market.

The Indian FMCG sector is expected to grow at a healthy pace in the coming years driven by rising disposable income, changing lifestyles, and an increase in packaged food consumption. The sector is highly competitive but also offers attractive investment opportunities due to its high growth potential and low valuations.

You can keep a check on top-performing stocks to choose which FMCG stock to buy that will help you diversify your portfolio to generate substantial returns and cater to the needs of your existing portfolio. With an increasing demand for top stocks from Indian investors, you can consider these lucrative investment options that suit the needs of both, short-term and long-term, portfolio requirements.

Disclaimer: The views expressed in this post are that of the author and not those of Groww.

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Research Analyst - Bavadharini KS