The Fast Moving Consumer Goods (FMCG) industry is the fourth largest sector in the Indian economy. It offers domestic and personal care products to consumers based on market demand.
While other industries were coping from the effects of the coronavirus pandemic, the FMCG sector was learning, innovating, and rising from the disruptions. Notably, the FMCG trends soared upwards due to increased digitization triggered by imposed lockdown restrictions. Thus, the COVID-19 pandemic crisis led to a boost in the FMCG industry with positive growth. We witnessed an increase in sales, especially of essential and sanitation products such as, hand sanitizers, disinfectant, N95 masks, etc.
The FMCG sector is looking forward to carry on with the momentum in the market. There has been a sustained revival across categories of FMCG products in rural and urban markets of the nation. Moreover, there has been growth of two major categories under FMCG sector, that is food and beverages; and due to medical advancements, the health and wellness category.
In the current environment, where the economic recovery is approaching, the FMCG sector is expected to thrive with growth of companies in this area. FMCG products are a significant part of your life. Since you are utilising these products, doesn’t it make sense to invest in companies manufacturing them and garner optimal returns?
ICICI Prudential Mutual Fund has launched ICICI Prudential FMCG ETF. It is open-ended Index Exchange Traded Fund tracking Nifty FMCG Index.
On the launch of this fund, Mr Nimesh Shah MD and CEO at 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.”
Table 1: Details of ICICI Prudential FMCG ETF
|Type||An open-ended Index Exchange Traded Fund tracking Nifty FMCG Index.||Category||Exchange Traded Fund|
|Investment Objective||The investment objective of the scheme is to provide returns before expenses that closely correspond to the total return of the underlying index subject to tracking errors. However, there can be no assurance or guarantee that the investment objective of the Scheme would be achieved.|
|Min. Investment||Rs 1000/- and in multiples of Re 1 thereafter.||Face Value||Rs 10/- per unit|
|Entry Load||Not Applicable||Exit Load||Nil|
|Fund Manager||– Mr Kayzad Eghlim
– Mr Nishit Patel
|Benchmark Index||Nifty FMCG TRI|
|Issue Opens:||July 20, 2021||Issue Closes:||August 02, 2021|
(Source: Scheme Information Document)
What will the Investment strategy for ICICI Prudential FMCG ETF be?
ICICI Prudential FMCG ETF will predominantly invest in stocks constituting the underlying index in the same proportion as in the Index and endeavour to track the benchmark index.
The investment strategy of this scheme is to primarily invest in leading companies of the FMCG sector. It will passively invest in the index that comprises of such quality stocks from the FMCG sector, which is the fourth largest sector in the Indian economy.
The scheme aims to track the performance of the Nifty FMCG index and maintain a low tracking error by closely aligning the portfolio in line with the index. The stocks comprising the underlying index are periodically reviewed by Index Service Provider. A particular stock may be dropped or new securities may be included as a constituent of the index.
The portfolio shall be rebalanced within 7 days to ensure adherence to the asset allocation norms of the scheme. Similarly, in the event of a constituent stock being demerged / merged / delisted from the exchange or due to a major corporate action in a constituent stock, the fund may have to reallocate the portfolio and seek to minimize the variation from the index.
About the benchmark
The NIFTY FMCG Index is designed to reflect the behaviour and performance of FMCGs which are non-durable, mass consumption products, and available off-the-shelf. The NIFTY FMCG Index comprises of 15 stocks from FMCG sector listed on the National Stock Exchange (NSE).
NIFTY FMCG Index is computed using free float market capitalization method, wherein the level of the index reflects the total free float market value of all the stocks in the index relative to a particular base market capitalization value.
The following is list of constituents under the index by their weightage as of now:
Under normal circumstances, the asset allocation will be as under:
Table 2: Asset Allocation of ICICI Prudential FMCG ETF
|Instruments||Indicative Allocation (% of net assets)||Risk Profile|
|Equity and Equity related securities of companies constituting the underlying index (Nifty FMCG Index)||95||100||Medium to High|
|Money market instruments including TREPs*, Units of debt schemes||0||5||Low to Medium|
|Units of Debt ETFs||0||5||Low to Medium|
(Source: Scheme Information Document)
Apart from investing 95% of its assets in equity and equity related securities of companies constituting the underlying index (Nifty FMCG Index), ICICI Prudential FMCG ETF may also invest up to 5% in Money market instruments including TREPs*, Units of debt schemes in order to fulfil the liquidity requirements.
Who will manage the ICICI Prudential FMCG ETF?
Mr Kayzad Eghlim and Mr Nishit Patel will be the dedicated fund managers for this scheme.
Mr Kayzad Eghlim is Vice President and Fund Manager at ICICI Prudential Asset Management Company Ltd. He has over 30 years of experience and his qualification includes, MBA, M.Com, and B.Com. Prior to this, he was associated with IDFC Investment Advisors Ltd. as Dealer Equities, Prime Securities as Manager, Canbank Mutual Fund (IS Himalayan Fund) as Fund Manager, Canbank Mutual Fund as Equity Dealer, Assisting the Fund Manager and worked with the Primary Market Department (IPO) at the beginning of his career.
The other schemes he manages are ICICI Prudential Equity – Arbitrage Fund, ICICI Prudential Nifty 100 ETF, ICICI Prudential Nifty Next 50 Index Fund, ICICI Prudential Nifty ETF, ICICI Prudential NV20 ETF, ICICI Prudential Sensex ETF, ICICI Prudential Nifty Index Fund, ICICI Prudential Equity Savings Fund, ICICI Prudential Nifty Low Vol 30 ETF, BHARAT 22 ETF, ICICI Prudential S&P BSE 500 ETF, ICICI Prudential Nifty Next 50 ETF, ICICI Prudential Bharat 22 FOF, ICICI Prudential Bank ETF, ICICI Prudential Midcap Select ETF, ICICI Prudential Midcap 150 ETF, ICICI Prudential Alpha Low Vol 30 ETF, ICICI Prudential IT ETF,ICICI Prudential Nifty Low Vol 30 ETF, and ICICI Prudential Healthcare ETF.
Mr Nishit Patel is Fund Manager – Passive Funds at ICICI Prudential Asset Management Company Ltd. He is a Chartered Accountant and B.com graduate. Prior to this, he was associated with ETF Business at ICICI Prudential AMC.
The other schemes managed by him are, ICICI Prudential Midcap Select ETF, ICICI Prudential Nifty 100 ETF, ICICI Prudential Nifty Next 50 Index Fund, ICICI Prudential Nifty ETF, ICICI Prudential NV20 ETF, ICICI Prudential Sensex Index Fund, ICICI Prudential Nifty Index Fund, ICICI Prudential Regular Gold Savings Fund (FOF), ICICI Prudential Gold ETF, ICICI Prudential Sensex ETF, ICICI Prudential S&P BSE 500 ETF, ICICI Prudential BHARAT 22 FOF, ICICI Prudential Nifty Next 50 ETF, ICICI Prudential Bank ETF, ICICI Prudential Private Banks ETF, ICICI Prudential Midcap 150 ETF, ICICI Prudential Alpha Low Vol 30 ETF, BHARAT 22 ETF, ICICI Prudential IT ETF, ICICI Prudential Nifty Low Vol 30 ETF, and ICICI Prudential Healthcare ETF.
Fund Outlook – ICICI Prudential FMCG ETF
ICICI Prudential FMCG ETF will seek to invest in securities that comprise of the Nifty FMCG index and replicate the index performance in order to provide investors with a way to benefit from India’s fourth largest sector, i.e. FMCG.
This scheme will offer investors an exposure to multiple facets of the FMCG sector. It will aim to invest in stocks of 15 leading companies from the FMCG industry. The scheme aims to benefit from the growing awareness, increased consumer spending, easy access, and changing lifestyles. With increased competition in the market, the companies are driven to innovate and launch new products, which helps these companies to adapt changes, business expansion and increase their growth potential.
The FMCG sector is considered an evergreen sector, the government’s production linked incentive (PLI) and various measures allow companies a major opportunity to boost exports. The FMCG products have a demand throughout the year; for instance, even amid the lockdown restrictions due to pandemic the demand for FMCG products was decent. Hence, investments in this sector will benefit long term investors.
Being a sectoral ETF, the scheme will be passively managed by investing in constituents of the underlying index and it eliminates the risk of stock selection. Although the scheme will offer the opportunity to invest in market leaders of FMCG sector, if the sector moves out of favour, your investments may turn sour due to concentrated nature of the portfolio.
This scheme is suitable for investors seeking to benefit from the growth of FMCG sector. You must ensure your suitability to the fund with high-risk appetite, long investment horizon and your investment objectives are aligned to the fund.
This article first appeared on PersonalFN here