Friends,
Now I would talk of the FMCG sector . It used to be trading at 31 PE on average basis for the member companies way back in 2000 and this PE ratio for the same group now stands at 20. Its share in total market capitalisation has come down to 5% from a very decent 24%. It was never expected to be so that this sector wuld loose so much of relative value. But the last eight years have been no ordinery years. The FMCG which has been patronising the advertisers all along found that the every rupee spent on advertisement was not rsulting in to the same growth percentage as it was traditionally doing and the added expenditure was going down the drain. This unnerved them and they had to find their feet to afresh. This was due to too many TV channels vying for the attention same set of eyes. That time is past and now two new thins have emerged. One, that they have now resorted to newer stratagies for the ad rupee spend and the second, that the market for the goods spplied and marketed by them has started growing fast due to more pockets having money to spend on these items now. Additionally, the distribution costs have come down fast and the brands have become all the more important in turning the desire to buy in to actuall buying. The moderate profit growth during past eight years togeter with the poorer discounting has taken its toll in shape of relative loss of value of the sector as a whole while the intrinsic value of the brands in their fold has gone up. Therefore , you mat have sen my continuous recomendation over the past many months to go for this sector which by the way has added value to your portfolios inspite of fall in indices over the last mnth or so.
HariOm,
krsnaKhandelwal
