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Dr. G. Sudarsana Reddy

Associate Professor
Department of Studies Research in Commerce, Dr. P. Sadananda Maiya Block, Tumkur University,
Tumkur, Karnataka


Keywords: FMCG, Index, Market, Performance, Risk, Return, Stock.

Fast moving consumer goods (FMCG) sector in India is the fourth largest in the economy and has a
market size of US$13.1 billion. It has been predicted that the FMCG market will reach to US$ 33.4 billion by
2015 from US $ billion 11.6 in 2003. Well-established distribution networks, as well as intense competition
between the organised and unorganized segments are the characteristics of this sector. The middle class and the
rural segments of the Indian population are the most promising market for FMCG and give brand makers the
opportunity to convert them to branded products. India has low per capita consumption as well as low
penetration level, but the potential for growth is huge.
The Indian economy is surging ahead by leaps and bounds, keeping pace with rapid urbanization,
increased literacy levels, and rising per capita income. The big firms are growing bigger and small-time
companies are catching up as well. According to the study conducted by AC Nielsen, 62 of the top 100 brands
are owned by multinational companies (MNCs), and the balance by Indian companies. Fifteen companies own
these 62 brands, and 27 of these are owned by Hindustan Unilever Limited (HUL). Pepsi is at third position
followed by Thumps-up, Britannia, Colgate, Nirma, Coca-Cola and Parle. Personal care, and soft drinks are the
two biggest categories in FMCG and they account for 35 of the top 100 brands. FMCG industry provides a wide
range of consumables. FMCG sector in India has a strong and competitive MNCs presence across the entire
value chain as a result of this, investment in FMCG industry is also increasing, specifically in India.
Many FMCG players have increased their investments in modern retail. There is also greater
acceptance from the consumer. The top ten Indian players alone are estimated to make an investment of $30
billion, while the rate of growth of FMCG modern retail is expected to rise from a current six per cent to 25 per
cent by 2018. Rising affluence and an increasing shift towards packaged and branded goods is one of the main
reasons for its growing affinity. Modern retail in FMCG is estimated to account for one-fourth of the total
FMCG sector, which is relatively large, given the high concentration of this sector in urban areas. The top 10
Companies in FMCG Sector are Hindustan Unilever Limited (HUL), Indian Tobacco Company (ITC), Nestl
India, GCMMF (AMUL), Dabur India, Asian Paints (India), Cadbury India, Britannia Industries, Procter &
Gamble Hygiene and Health Care, and Marico Industries. These companies are the leaders in their respective
sectors. The personal care category has the largest number of brands with 21, of which 11 are from HUL
aggregating Rs. 3,799 crore or 54 percent of the personal care category.
The food category has also seen innovations like softies in ice creams, chapattis by HUL, ready to eat
rice by HUL and pizzas by both GCMMF and Godrej Pillsbury.
There is a huge growth potential for all the FMCG companies as the per capita consumption of almost
all products in the country is amongst the lowest in the world. The demand could be increased further if these
companies can change the consumer's mindset and offer new generation products. Earlier, Indian consumers
were using non-branded apparel, but today, clothes of different brands are available and the same consumers are
willing to pay more for branded quality clothes. It is the quality, promotion and innovation of products, which
Investment in the equity is a very volatile and investors feel it is a very risky market. The fast
moving consumer goods stocks are considered as the safe bet because the hardly get influenced by the
market movement. But, there are instances fast moving consumer goods stock price also has fallen down
even though their financial performance is satisfactory. The study tries to know the factor influencing
stock price and study the relation between FMCG stock price and index. The scope of the study has been
limited to the select three FMCG stocks - Britannia, Hindustan Unilever Limited (HUL) and Indian
Tobacco Company (ITC). The study covers one year period from 1
January 2010 to 31
December 2010.
The study uses analytical research method. The data collected was analysed with the help of mean, beta,
alpha, standard deviation and variance and co-variance. The study found that the share of Britannia,
HUL and ITC companies are favorable during the study period. While taking decision, the investor
should take relevant information. The analysis like fundamental and technical are very important to take
better decision of buying and selling of shares.

can drive many sectors. FMCG products are sold quickly at relatively low cost. Though the absolute profit made
on FMCG products is relatively small, they generally sell in large quantities, so the cumulative profit on such
products can be large.
Growth is also likely to come from consumer 'upgrading' in the matured product categories. To match
the customers expected to shift to processed and packaged food, India needs around US$ 28 billion of
investment in the food-processing industry. Automatic investment approval (including foreign technology
agreements within specified norms), up to 100 per cent foreign equity or 100 per cent for NRI and Overseas
Corporate Bodies (OCBs) investment, is allowed for most of the food processing sector.
FMCG stocks are now catching eye of investors for investing as best option in stock market. These
stocks are now catching the eye of investors. Analysts and market experts are recommending to buy select
FMCG stocks, a move which is not just being considered as a safe ploy but also as a defensive strategy to
counter a volatile and uncertain market. The trend is visible on the bourses where leading FMCG counters have
outperformed the overall market during the last few sessions. Take the case of MNC giant Hindustan Unilevers
(HUL) stock has made its 52-week high at Rs. 267 on December 19, at a time when BSEs benchmark index,
Sensex, was trading under the 10,000-mark (down by over 50 percent from its life-time high of 21,000 made in
January, 2008). Similarly, the scrip of another FMCG giant, Godrej Consumer is currently hovering near 52-
week high of Rs 145. Market analysts who earlier stayed away from FMCG stocks are now taking a fresh look
at these rising scrips. Though, some reservations about the FMCG sector still persists, the analysts have
accepted the safe nature of these stocks.
Fall in commodity prices (from crude, vegetable fat and food articles) is the main reason behind the
outperforming FMCG sector. It is an optimistic about the FMCG sector. Though the markets (at current level)
have already discounted the positive impact of the fall in the raw material costs, and it is safe to invest when the
prices of the FMCG scrips fall.
However, not all are convinced. Now-a-days, smaller players are eating into the business of big MNC
players in the FMCG sector. Biggies are therefore losing their market share. There is some momentary activity
in FMCG stocks, which is a part of the defensive strategy adopted by the traders to restrict the downslide. But
this trend will not prevail for a long time.

Statement of the Problem
Investment in the equity is a very volatile and investors feel it is a very risky market to invest as there
are ups and downs in the equity market. The volatility has influenced even FMCG stocks. The FMCG stock are
considered as the safe bet because the hardly get influenced by the market movement. In the recent time the
FMCG stock price also has fallen down even though their financial performance is satisfactory. The problem is
what factor influences the FMCG stock price? Is there any co-relation between FMCG stock price and index?
Other issues are what is the impact of FII investment on the stocks? What environmental factor influences the
stock price? These are some issues need to be studied in detail. Therefore, the present study.

Objectives of the Study
To evaluate the performance of select three FMCG stocks.
To make a comparative analysis of the three FMCG stocks with Nifty.
To find the co relation between the FMCG stocks and market index.
To understand the impact of external factors on FMCG stocks.

Scope of the Study
The scope of the study has been limited to the select three FMCG stocks - Britannia, Hindustan
Unilever Limited (HUL) and Indian Tobacco Company (ITC). The study covers one year period from
1st January 2010 to 31st December 2010. Therefore, it excludes other companies and the period
before and after the study period.
The study uses analytical research method. The study is mainly based on the secondary data and it
uses one year data from 1st January 2010 to 31st December 2010. The secondary data was obtained
through internet, magazines, and journals. The market return is collected by taking Nifty as the bench
mark index. Three companies stocks are selected for the study they are Britannia, HUL and ITC.
Stock returns and their respective closing prices are collected from the date 1st January 2010 to 31
December 2010.
Plan of Analysis of Data
The data collected is analysed with the help of mean, beta, alpha, standard deviation and variance and
Analysis and Interpretation
The data collected for the study analysed by using Return, Risk, Beta, Alpha and Correlation.
Return is calculated by A.M. by using the following formula:
X = X / n
Where: X = Stock return, n= No. of observations
Return is calculated by the following formula

Stock Return = (Todays Stock Price Yesterdays Stock Price / Yesterdays Stock Price) 100

Table 1 Monthly Return of NSE and Britannia
Date NSE Return Britannia Return
Jan-2010 -0.37905 -0.34305
Feb-2010 0.047616 0.33353
Mar-2010 0.308901 -0.19751
Apr-2010 0.030739 0.174715
May-2010 -0.17399 0.155269
Jun-2010 0.163318 0.382108
Jul-2010 0.13359 0.279676
Aug-2010 0.006764 0.219571
Sep-2010 0.487063 -3.96151
Oct-2010 0.02864 -0.2667
Nov-2010 -0.1635 -0.11754
Dec-2010 0.23015 0.133971
Observation 12 12
Mean 0.096526 -0.26729

Table 1 clearly shows that in the month of September the returns of market (0.487063) and Britannia
(-3.9615) are volatile. They move in opposite direction and their returns are all most equal in the month of
August. And in the other months, the returns of market and Britannia are less volatile when compared to the
month of September. In the month of May the market shows a negative return, and in the month of June again
the market returns increases. The September month returns have fallen down due to stock split on 8

September 2010.

Hindustan Unilever Limited (HUL)

Table 2 Monthly Returns of NSE and HUL
Date NSE Return HUL Return
Jan-2010 -0.37905 -0.47771
Feb-2010 0.047616 -0.11421
Mar-2010 0.308901 0.085753
Apr-2010 0.030739 0.017257
May-2010 -0.17399 -0.04127
Jun-2010 0.163318 0.559376
Jul-2010 0.13359 -0.27427
Aug-2010 0.006764 0.23543
Sep-2010 0.487063 0.753343
Oct-2010 0.02864 -0.21145
Nov-2010 -0.1635 0.066528
Dec-2010 -0.1711 0.227092
Observation 12 12
Mean 0.096526 0.068823

The stock of the company has dynamic fluctuations during the year 2010 (Table 2) compare to the
marginal fluctuations of the market. The drastic pitfalls are easily observed in January 2010 because of
decrease in sales but the company has succeeded in maintaining the status quo during the year 2010 to some
extent even compared with the company returns to the market returns. Thus, it can be said that the company is
gradually and eventually improving both in the company returns and the market returns.

Indian Tobacco Company (ITC)

Table 3 Monthly Returns of NSE and ITC
Date NSE Return ITC Return
Jan-2010 -0.37905 -0.06968
Feb-2010 0.047616 -0.35483
Mar-2010 0.308901 0.602717
Apr-2010 0.030739 0.058302
May-2010 -0.17399 0.058302
Jun-2010 0.163318 0.355423
Jul-2010 0.204232 0.052423
Aug-2010 0.006764 -1.9818
Sep-2010 0.487063 0.436991
Oct-2010 0.02864 1.186465
Nov-2010 -0.1635 0.029406
Dec-2010 -0.1711 0.076442
TOTAL 0.389632 0.450161
Observation 12 12
Mean 0.096526

Both the NSE and ITC returns has avoided drastic fluctuations in the beginning of the financial year
2010 (Table 3), but at the end of the year 2010 compared to the ITC return NSE has gone down. Thus, it can
be observed that both the market and ITC returns have seen major observable fluctuations in its returns in the
year 2010 and in the beginning of the year 2010.

Comparison of Return between the Select FMCG Companies

It can be seen from the Figure 1 that HUL has performed well in the quarters gaining more returns
facing the usual small drops which is the common result for all the companies. Britannia though second after
HUL has fallen drastically at the end of year 2010 and ITC though was under-performing could pick up at the
end. Britannia has got more return in the beginning but failed tremendously compared to other two companies.
ITC though performed better than HUL could not beat the performance of HUL and Britannia at the end.
Thus. It can be said that on an overall HUL stand in a good position followed by ITC and leaving behind
Britannia. ITC can be said the HUL has got more returns in the year 2010 followed by ITC and Britannia.

The risk associated with the stock and market returns is calculated by using Standard Deviation and
variance (statistical tools)
The standard deviation is calculated with the following formula:

SD = (X-X)
/ n-1
Table 4 Standard Deviation of the Select Companies
Company Calculation SD
SD of Market 343.56 / 42-1
SD of Britannia 119.63 / 42-1
SD of Market 343.56 / 42-1
SD HUL 119.635 / 42-1
SD of Market 356.78 / 42-1
SD ITC 298.95 / 42-1
The standard deviation of all the three select companies Britannia, HUL, and ITC is (Table 4) less
than market. So, the return of all the three companies is more consistent compared to market. The standard
deviation is more in ITC as compared to other companies, but its return is less. On the other hand, risk and
return of the HUL is high.
Beta is referred to as systematic risk to the market and the unsystematic risk. Beta is useful piece of
information both for individual stock as well as portfolios. It is a measure of risk and better used in the
analysis of portfolios. Beta is the slope of the characteristics of regression line and it describes the relationship
between the stocks return and the index returns
Beta is used for ascertain the stock relationship with market. The following formula used for
(Beta) = NXY-(X)(Y) / NX-(X)

Table 5 Beta of the Select Companies

Company Calculation (Beta)
(42*6.352) - (-56.2)(-0.87)
54(0.9069) - (-56.2)
141.763 / 10038.29 0.0141
(42*6.352) - (-56.2)(-0.87)
42(650.73) - (-58.7)
43491 / 107848.31 0.4033
(42*432.78) - (-58.7)(-13.52)
42 (2061) - (-58.7)
74552.62 / 107836 0.6913
All the sample companies stock returns was influenced by market return to a small extent as the
value is positive and less than one (Table 5).
Table 5 indicates that one percent change in NSE Index return would cause 0.0.0141 percent change
in Britannia stock return. In the same way if one percent change in NSE index return would cause 0.4033
percent change in HUL stock return. If one percent change in NSE index return would cause 0.6913 percent
change in ITC stock return.
Beta of the select companies stock is less than one and also less than 0.5 except ITC, so we can say
that the select stocks are less risky. Therefore, the stock is less volatile compared to market.

The size of the alpha exhibits the stocks unsystematic return and its average return independent of
the markets return. If alpha gives a positive value, it is a healthy sign but alphas expected value is zero.

ALPHA () = Y ( * X)
Table 6 Alpha of the Select Companies
Company Calculation Alpha
Britannia -0.029-(0.0141 * (-1.04)) 0.0143
HUL 0.25-(0.4033 * (-1.09)) 0.68
ITC -0.12-(0.6913 * (-1.09)) 0.63
Alpha indicates that the stock return is independent of the market return. A positive value of alpha is
a healthy sign and would yield profitable return.
As per Table 6 all the select companies stocks have got positive values. This indicates that all stocks
are healthy and would yield profitable return. According portfolio theory, in a well diversified portfolio the
average value of alpha of all stocks turns out to be zero.

The Correlation of the stock and market indicate the extent which stock return is related to the market
return. The correlation is calculated by the following formula.

r = ____n XY (X) (Y)

Table 9 Beta of the Select Companies
Company Calculation Correlation
42*6.352- (-56.2)x(-1.57)


42*21.307 (-58.7) (-6.5)
42*101.96- (-58.7)

The correlation co-efficient measures the nature and the extent of relationship between the stock
market index return and the stock return in a particular period. Correlation co-efficient should lies between -1
to +1. On an overall the Britannia shows more positive correlation. All the sample companies stock return has
got positive co-relation. Thus, market index return and FMCG stock have positive co-relation.

From the above analysis and interpretation the following findings have drawn:
It is found through the comparative study of stock performance on NSE taking three companies
namely Britannia, HUL and ITC the stocks of FMCG has not affected easily to the core with the
other market fluctuations. HUL has performed positively in the NSE stock performance when
compared to ITC and Britannia.
The study of stock performance of FMCG becomes very difficult because of the unusual ups and
Britannia though one of the well known and leading company has seen with the negative returns in
the year 2010. It may be due to the fact that the share of the company costs too high and low
performance in the near future.
ITC is well known company which earns majority of its returns from tobacco, but the other
diversification has not helped in its stock development in the market to increase its returns.
In all the sample companies the return is lass than market return.
ITC faces more risk factors. But, FMCGs in India till today has not faced the sudden fall in the
demand of its products, where it can sustain with the company returns.
It is clear that the NSE stock index in the select companies performing better compared to the
Company stock index.

It may be suggested that the sample companies shall concentrate on improving the company margins
rather than depending on market index.
ITC may issue the shares separately on its diversified units in order to increase returns on market
Investors should go for long-term investment.
Speculators and traders can take advantage of market volatility.
Before investing, shareholders should use the variables like fundamental analysis, technical analysis,
to determine the stock price effectively.
Shareholders should analyse the price earnings ratio net turnover, sensex and nifty and capitalization
rate from the previous years, which indicates further, increase or decrease in shares.

In the security market the prices of securities have more fluctuating over the 24 months, some of the
securities are bullish and others are bearish in trend. The share of Britannia, HUL and ITC companies are
favorable, during the study period. While taking decision, the investor should take relevant information. The
analysis like fundamental and technical are very important to take better decision of buying and selling of
To conclude, investing in the stock market is very risky. Short-term investment in the equity may be
unfavorable but long-term investment will always favorable. So, investor has to prefer the long-term
investment like equity stocks. Equity stocks are considered as risky securities but they give a very good return.

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