For the first time in 20 years, shares of FMCG companies like Hindustan Unilever, ITC and Asian Paints have failed to play a defensive role and are performing poorly in the falling market. Since the end of September 2024, the Nifty FMCG index has fallen 20.2 percent while the benchmark Nifty 50 has declined by 12.6 percent during this period.
The trend continued in the year 2025 and the FMCG index calendar fell 8 percent from the beginning of the year, while the Nifty 50 declined by 4.6 percent. The FMCG index has fallen by 3.2 percent from the end of FY 24 (March 2024), while the benchmark index has increased by one percent.
As a result, the FMCG sector has reduced the weight in the Nifty 50 during the last one year. The FMCG sector is now 9.5 percent of the Nifty 50, which is the lowest since March 2011, at that time it was 9.2 percent. In comparison, the sector was 11.1 percent in the year 2014 in 2014 and 10.9 percent in the year 2024 in 2024.
Historically, the shares of FMCG companies have performed better in the weak market and have reduced the decline and have increased the relative weight in the index. On the other hand, high beta areas such as cyclic and banking, metal, oil and gas, and capital goods have performed better during the market, which has led to a relative decline in the FMCG weights.
The FMCG region of Nifty 50 has been traditionally quite negative correlation between the transformation changes and one year returns of the benchmark index. However, now this historical form is broken. The FMCG shares are among the worst performers during the current selling in the market and their weight in the index is steadily declining.
Last time shares of FMCG companies demonstrated such a favorable-specific form that declined along the broad market as well as a decline. This happened during FY 2001 to FY 2003. During that time, when the Nifty 50 declined by 15 percent between March 2001 and March 2003, the FMCG sector was reduced from 24.9 percent to 19.1 percent in the index.
For over 20 years, shares of FMCG companies have served as a safe option during the market fall, including the Kovid-19 selling and FY 23 fall. For example, at the end of FY 20, the FMCG sector loaded 320 base points to a six -year top level of 14.5 percent, while the Nifty 50 declined by 26 percent due to the epidemic. After this, during the next two years, the weights of the region declined continuously as the market rose by 70.9 percent and 18.9 percent respectively in the market, due to the fiscal year 21 and FY22, due to March 2022, the weight of the FMCG region declined to 9.9 percent by March 2022. .
The sector again performed better in FY 23 and a decline of 0.6 percent in Nifty 50 increased to 260 base points. In FY 24, this cycle reversed and Nifty 50 rose by 28.6 percent.
First Published – February 26, 2025 | 11:09 pm IST
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