With the December quarter earnings almost over and elections as the next major trend, let’s analyse between Nifty Finance and Nifty FMCG, which sector has better long-term investment opportunities? Both Nifty Finance and Nifty FMCG underperformed the benchmark Nifty in the last year. Nifty FMCG jumped over 16 percent while Nifty Fin gained 9.5 percent as against a 21.6 percent rise in the Nifty in the last year. However, both these indices have been in the red in 2024 YTD. Nifty FMCG has been a bigger loser, down over 6 percent while Nifty Fin fell almost 5 percent in this period. In comparison, the Nifty has been volatile but in the green, up 1.4 percent in 2024 YTD.
Both indices have also not participated in the recent rally and had hit their peaks in late December or early January. Currently, Nifty FMCG is almost 8 percent away from its record high of 57,966.70, hit on January 5, 2024. Meanwhile, it is still over 20 percent higher than its 52-week low of 44,392.05, hit on March 20, 2023. On the other hand, Nifty Fin is over 5 percent away from its peak of 21,627.35, hit on December 28, 2023, but is still over 18 percent higher than its 52-week low of 17,261.30, hit on March 16, 2023.
Meanwhile, in the long term, Nifty FMCG has given better returns between the two. The FMCG index has rallied over 58 percent in the last 3 years while Nifty Fin is up 17 percent and Nifty has gained 44 percent.
Despite negative returns in 2024 YTD, 40 percent (6/15) of the constituents of the Nifty FMCG index have been in the green in 2024 YTD. Varun Beverages has gained the most almost 15 percent followed by Godrej Consumer, up 10 percent, and Tata Consumer, up 5 percent. Meanwhile, Emami was the top loser, down 17.6 percent in 2024 YTD followed by ITC, down 13 percent, and HUL, down 11.3 percent.
The dynamics for both sectors are different in nature; in the long run, both sectors will outperform. As far as the FMCG sector is concerned, Indian FMCG companies have been on a structural growth trajectory, with many categories still under-penetrated and underserved, and rural penetration is still underway. As Indian consumers increase their purchasing power, the propensity to buy premium and branded products will increase.
Apurva Sheth, Head of Markets Perspectives & Research, SAMCO Securities prefers Nifty FMCG over Nifty Finance. Nifty Finance may give higher returns than the Nifty FMCG index in the 6-12 months perspective.
In conclusion, based on the data and analysis, Nifty FMCG seems to be a more favorable long-term investment opportunity compared to Nifty Finance. However, individual investors should consider their risk appetite and consult with certified experts before making any investment decisions.
