Best FMCG Mutual Funds: SBI Consumption Opportunities Fund vs. Mirae Asset Great Consumer Fund
August 26, 2024
India is one of the largest and fastest-growing consumer markets in the world, presenting significant opportunities for growth. The Fast-Moving Consumer Goods (FMCG) sector is a crucial element of the nation’s economic growth. Known for its high turnover and essential products, the FMCG industry has seen significant transformation over the decades.
The Indian FMCG sector’s origins can be traced back to the early 20th century when it was characterized by a small number of local players and limited product offerings.
Post-independence, the industry grew steadily with the establishment of major companies like Hindustan Unilever, Dabur, and ITC, which dominated the market with their extensive portfolios of household products. The sector was largely unorganized until the 1990s when economic liberalization introduced global brands and modern retail formats, dramatically changing the landscape.
The 2000s marked a significant shift with increased consumer spending, urbanization, and a growing middle class. These factors spurred demand for a wider range of FMCG products and introduced new players into the market. The sector saw an influx of international brands and innovations in product offerings, packaging, and distribution. From traditional retail to modern e-commerce, the sector’s evolution has had a profound influence on the Indian equity market and presents intriguing investment opportunities.
[Read: FMCG Mutual Funds: A Smart Way to Benefit from India’s Large Consumer Market]
Impact on the Indian Equity Market
The FMCG sector holds a significant position in the Indian equity market, contributing substantially to market capitalization and influencing overall market sentiment. Companies in this sector are often seen as stable and resilient investments due to their consistent demand and profitability. As a result, FMCG stocks are a popular choice among investors seeking stability and steady returns.
The sector’s performance directly impacts major indices, including the Nifty India Consumption Index. This index tracks the performance of companies that are engaged in consumer-related activities, including FMCG. The growth and profitability of FMCG companies, driven by factors like rising disposable incomes and changing consumer behaviour, positively influence the index and reflect broader economic trends.
Data as of August 23, 2024
Do note past performance is not an indicator of future returns
(Source: ACE MF, data collated by PersonalFN Research)
The Nifty India Consumption Index is a key benchmark for the performance of consumer-driven sectors, including FMCG. It includes companies that are involved in various segments of consumer goods and services, providing a comprehensive view of the sector’s health and growth prospects.
The index has delivered a robust return over the past year, reflecting the resilience of the consumption sector amidst economic fluctuations. Companies like Hindustan Unilever, ITC, and Nestle India contribute significantly to the index, driven by steady demand for essential consumer products.
Major players like Avenue Supermarts (D Mart) and Reliance Retail add to the index’s growth by expanding retail networks and increasing consumer spending. As India continues to grow and develop, the index is likely to remain a key benchmark for investors seeking exposure to the consumption story in India.
The Indian FMCG industry has come a long way from its traditional roots to become a dynamic and evolving sector. As a result, FMCG mutual funds have emerged as attractive investment options for investors seeking to capitalise on the growth potential of the FMCG sector. FMCG mutual funds typically invest in a range of stocks within the sector, providing investors with access to a broad portfolio of companies involved in the manufacturing, distribution, and retail of consumer products.
This article offers an in-depth comparison of two prominent FMCG mutual funds in India: SBI Consumption Opp Fund vs Mirae Asset Great Consumer Fund, to aid you in capitalise on the sector’s current momentum.
# – SBI Consumption Opportunities Fund
SBI Consumption Opp Fund is an open-ended equity scheme that belongs to SBI Mutual Fund. It is a well-established sectoral fund focused on the Indian FMCG (Fast-Moving Consumer Goods) sector. Launched in January 2013, the fund has a long track record and has been a popular choice among investors seeking exposure to the FMCG sector.
The SBI Consumption Opportunities Fund aims to provide investors with long-term capital appreciation by investing predominantly in equity and equity-related securities of companies in the consumption and consumption-related sectors. Currently, the fund holds an AUM of Rs 2,679.47 crores.
# – Mirae Asset Great Consumer Fund
Mirae Asset Great Consumer Fund is an open-ended equity scheme and belongs to Mirae Asset Mutual Fund. It is another prominent sectoral fund focusing on the Indian FMCG sector. Launched in March 2011, the fund has quickly gained popularity due to its strategic approach to investing in the FMCG space and currently holds an AUM of Rs 4,069.29 crores.
The Mirae Asset Great Consumer Fund aims to provide capital appreciation by investing primarily in equities of companies that stand to benefit from the growing consumption demand in India. The fund focuses on sectors such as consumer staples, consumer discretionary, healthcare, automobiles, financials, and retail, among others.
Investment Style and Philosophy:
– SBI Consumption Opportunities Fund: follows a bottom-up approach for stock selection and aims to identify companies with strong fundamentals, sustainable competitive advantages, and growth potential. The fund invests across various segments within the consumption theme, including consumer staples, consumer discretionary, retail, and e-commerce.
The fund managers aim to identify and invest in businesses that are leaders in their respective sectors or possess a significant competitive edge. Additionally, the SBI Consumption Opportunities Fund incorporates a mix of large-cap, mid-cap, and small-cap stocks to capitalize on growth opportunities across different segments of the market, providing a balanced risk-reward profile to its investors.
– Mirae Asset Great Consumer Fund: follows a rigorous bottom-up stock selection process, focusing on identifying high-quality businesses with sustainable competitive advantages, strong earnings growth, and robust financials. The fund aims to build a portfolio of companies/ funds that are likely to benefit either directly or indirectly from consumption-led demand in India.
The Mirae Asset Great Consumer Fund invests in a wider array of sectors influenced by consumption trends, including not only consumer staples and discretionary sectors but also healthcare, automobiles, and financials. The fund manager actively manages the portfolio, adjusting sector and stock weights based on market conditions and growth prospects.
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Performance Comparison: Rolling Returns
Scheme Name Absolute (%) CAGR (%) 1 Year 3 Years 5 Years 7 Years 10 Years SBI Consumption Opportunities Fund(G)-Direct Plan 30.35 28.49 20.49 18.71 18.31 Mirae Asset Great Consumer Fund(G)-Direct Plan 32.47 24.63 20.61 19.41 19.57 Category Average – FMCG 29.39 22.70 19.19 16.72 14.60 Benchmark – Nifty India Consumption – TRI 27.91 20.18 16.52 14.91 15.24 Data as of August 23, 2024
Do note past performance is not an indicator of future returns
The securities quoted are for illustration only and are not recommendatory.
(Source: ACE MF, data collated by PersonalFN Research)The SBI Consumption Opportunities Fund and the Mirae Asset Great Consumer Fund have shown strong performance across various periods, reflecting their robust strategies and the potential of the consumption sector in India.
Over the three years, the SBI Consumption Opportunities Fund has taken the lead with a CAGR of 28.49%, significantly outperforming the Mirae Asset Great Consumer Fund, which recorded a CAGR of 24.63%. Both funds also exceeded the category average of 22.70% and the benchmark's 20.18%, highlighting their superior stock-picking strategies and effective fund management during this period. This suggests that SBI's fund may have been more successful in identifying and capitalizing on short-term opportunities within the FMCG sector.
Looking at the longer term, both funds demonstrate consistent performance. There is a slight edge that reflects Mirae Asset's ability to sustain strong returns over a more extended period. Notably, both funds continue to outperform the category average and the Nifty India Consumption benchmark, indicating that they have maintained a resilient portfolio amidst varying market conditions.
Both funds have shown strong potential in capitalizing on the growing consumption demand in India, making them attractive options for investors looking for exposure to this dynamic sector.
Do note the fortunes of these funds are heavily tied to the performance of the Indian FMCG sector. Any headwinds faced by the sector can significantly impact their NAV. Moreover, past performance should not be the only element, it's important to note that one may consider other factors like portfolio holdings, risk profile, and investment philosophy before making a decision.
[Read: Mutual Funds Are Betting Big on These Sectors: Are You Missing Out?]
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Portfolio Composition: Asset Allocation of Schemes
The asset allocation between the Mirae Asset Great Consumer Fund and the SBI Consumption Opportunities Fund shows a notable difference in their investment strategies, particularly in their focus on market capitalization segments.
Scheme Name Large Cap % Mid Cap % Small Cap % Mirae Asset Great Consumer Fund 62.42 7.81 28.48 SBI Consumption Opportunities Fund 31.45 24.30 40.68 Data as of July 31, 2024
Do note past performance is not an indicator of future returns
The securities quoted are for illustration only and are not recommendatory.
(Source: ACE MF, data collated by PersonalFN Research)Both Mirae Asset Great Consumer Fund and SBI Consumption Opp Fund focus on investing in companies under the FMCG segment, but their approach to diversification within that sector differs.
The Mirae Asset Great Consumer Fund has a significant inclination towards large-cap stocks, with about 62.42% of its assets allocated to this segment. This strategy indicates a preference for stability and steady growth, as large-cap companies are typically well-established with strong market positions and consistent earnings.
The fund also has 28.48% of its assets in small-cap stocks, which suggests a balanced approach to achieving higher returns through potential growth stocks, although these investments come with a higher risk. The remaining 7.81% is invested in mid-cap stocks, reflecting a moderate exposure to companies that are still growing but have crossed the initial stages of development.
On the other hand, the SBI Consumption Opportunities Fund has a different approach, with a relatively lower allocation to large-cap stocks at 31.45%. This lower allocation suggests that the fund is less focused on stability and more on capturing the growth potential of smaller companies. The fund majorly invests in small-cap stocks, which make up 40.68% of its portfolio. This large exposure to small-cap stocks indicates a higher risk-return profile, aiming to capitalize on the rapid growth opportunities in emerging companies within the consumer sector.
Additionally, the fund allocates 24.30% to mid-cap stocks, offering a balanced exposure between large and small companies, which could potentially provide both growth and stability.
Overall, the asset allocation of these two funds reflects different risk appetites and investment strategies. The Mirae Asset Great Consumer Fund leans more toward a balanced risk approach with a mix of stability and growth, while the SBI Consumption Opportunities Fund is skewed towards higher risk and potentially higher returns through a greater focus on mid and small-cap stocks.
[Read: Investing in High-Risk Mutual Funds: A Bold Approach]
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Market Volatility: Risk Profile of Schemes
Investing in sectoral funds may offer benefits from the growth potential of the underlying sectors like – FMCG; however, understanding the scheme's risk-reward profiles is crucial before investing.
Risk Ratio Mirae Asset Great Consumer Fund SBI Consumption Opportunities Fund Standard Deviation (3 Year) 13.80 12.71 Sharpe 0.37 0.46 Sortino 0.88 0.99 Data as of July 31, 2024
Do note past performance is not an indicator of future returns
The securities quoted are for illustration only and are not recommendatory.
(Source: ACE MF, data collated by PersonalFN Research)An investment with high volatility is considered riskier than an investment with low volatility; the higher the Standard Deviation, the higher the risk. The Mirae Asset Great Consumer Fund shows a standard deviation of 13.80 over three years, compared to 12.71 for the SBI Consumption Opportunities Fund. This suggests that the Mirae Asset Great Consumer Fund has experienced slightly higher fluctuations in its returns, indicating a higher risk level relative to the SBI fund.
In terms of risk-adjusted returns, the SBI Consumption Opportunities Fund has a Sharpe Ratio of 0.46, which is higher than the Mirae Asset Great Consumer Fund's Sharpe Ratio of 0.37. This implies that, on a risk-adjusted basis, the SBI fund has delivered better returns than the Mirae fund, making it more attractive for risk-averse investors who seek to maximize returns for the amount of risk they are willing to take.
A higher Sortino Ratio indicates that a fund has higher risk-adjusted returns without taking on as much downside risk. Here again, the SBI Consumption Opportunities Fund outperforms with a Sortino Ratio of 0.99 compared to 0.88 for the Mirae Asset Great Consumer Fund. This indicates that the SBI fund has been more effective at minimizing downside risk while achieving its returns.
Remember, this comparison is just to give you an idea about the risk profile of the two best pharma mutual funds. Consider your risk tolerance and investment goals to determine which fund aligns better with your investment strategy.
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Top Holdings of the Schemes:
The SBI Consumption Opportunities Fund and the Mirae Asset Great Consumer Fund are both focused on investing in companies that stand to benefit from increased consumer spending and consumption patterns in India. However, their approaches to sector allocation and top holdings reveal distinct strategies for capturing this consumer growth potential.
SBI Consumption Opportunities Fund Mirae Asset Great Consumer Fund Company % Assets Company % Assets Ganesha Ecosphere Ltd. 6.07 Bharti Airtel Ltd. 7.06 Bharti Airtel Ltd. 5.12 ITC Ltd. 5.60 Jubilant FoodWorks Ltd. 4.10 Hindustan Unilever Ltd. 4.79 ITC Ltd. 3.51 Maruti Suzuki India Ltd. 4.19 Hindustan Unilever Ltd. 3.23 Trent Ltd. 3.70 Whirlpool Of India Ltd. 3.12 Asian Paints Ltd. 3.64 Colgate-Palmolive (India) Ltd. 2.93 Zomato Ltd. 3.64 Britannia Industries Ltd. 2.85 Tata Motors Ltd. 2.93 Blue Star Ltd. 2.77 Titan Company Ltd. 2.88 Page Industries Ltd. 2.74 United Spirits Ltd. 2.68 Data as of July 31, 2024
Do note past performance is not an indicator of future returns
The securities quoted are for illustration only and are not recommendatory.
(Source: ACE MF, data collated by PersonalFN Research)The SBI Consumption Opportunities Fund focuses on a diverse range of companies benefiting from consumer spending. Its top holdings include Ganesha Ecosphere Ltd. (6.07%), highlighting a focus on sustainability, and Bharti Airtel Ltd. (5.12%), reflecting investment in digital consumption. The fund also has stakes in well-known consumer goods companies like Hindustan Unilever Ltd. (3.23%) and Colgate-Palmolive (India) Ltd. (2.93%), emphasizing its focus on companies with strong brand equity in essential consumer products.
The Mirae Asset Great Consumer Fund leans more towards companies that cater to rising urbanization and disposable incomes. Its largest holdings are in Bharti Airtel Ltd. (7.06%) and ITC Ltd. (5.60%), similar to SBI's focus, but with a stronger emphasis on telecom and digital services. Notably, the Mirae fund also holds Asian Paints Ltd. and Zomato Ltd. (both at 3.64%), reflecting a tilt towards companies that cater to both essential and lifestyle-driven consumption.
This suggests that both funds are heavily invested in India's leading FMCG companies, indicating confidence in its growth potential.
Both funds have substantial allocations to consumer staples and discretionary sectors, but their specific investments suggest different emphases. The SBI Consumption Opportunities Fund appears to have a more diversified approach within the consumption space, with significant positions in both consumer goods and services. The Mirae Asset Great Consumer Fund, on the other hand, seems to prioritize sectors that are directly influenced by urbanization and rising disposable incomes.
The SBI fund offers a more balanced exposure across consumer goods and services, emphasizing essential goods and sustainable practices. In contrast, the Mirae fund leans more towards sectors poised to benefit from lifestyle changes, urbanization, and increased disposable incomes, with a notable emphasis on telecom, automotive, and luxury goods.
This subtle difference in sector focus within the FMCG segment could influence the funds' performance based on how those specific stocks perform.
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Expense Ratio of the Schemes
When comparing thematic funds, the Expense Ratio, which represents the annual fee charged, plays a crucial role in determining your returns. Here's a quick breakdown of SBI Consumption Opp Fund vs Mirae Asset Great Consumer Fund:
Scheme Name Direct Plan Expense Ratio Regular Plan Expense Ratio SBI Consumption Opportunities Fund 0.92% 2.01% Mirae Asset Great Consumer Fund 0.41% 1.85% Data as of July 31, 2024
Do note past performance is not an indicator of future returns
The securities quoted are for illustration only and are not recommendatory.
(Source: ACE MF, data collated by PersonalFN Research)As you can see, the SBI Consumption Opp Fund has a significantly higher expense ratio for both plans as compared to the Mirae Asset Great Consumer Fund. Do note even a small percentage point difference in expense ratio may accumulate over time and impact your returns.
Mirae Asset Great Consumer Fund's lower expense ratios under the direct and regular plan could be considered a cost-effective option for many investors. However, do remember, that a lower expense ratio translates to potentially higher returns over time, but a lower expense ratio should not be the only factor to be considered while investing in sectoral funds.
[Read: Thematic Funds Become Market Leaders with Record-High AUM Growth]
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Suitability of Investors to the Schemes:
SBI Consumption Opportunities Fund is tailored for investors who are optimistic about the growth prospects of the consumer sector. It targets companies that are poised to benefit from rising consumer spending and shifting economic patterns. The SBI fund typically focuses on a broad range of consumer-oriented sectors, including discretionary and staples, making it suitable for investors who seek exposure to various segments within the consumer space.
The fund holds a potentially higher allocation to small-cap stocks. It might appeal more to investors with a higher risk tolerance who are looking for aggressive growth potential within the FMCG sector. Its concentrated approach in high-growth areas may offer significant upside but also involves greater risk.
Mirae Asset Great Consumer Fund is suitable for investors who are looking for a diversified approach within the consumer sector and who can handle moderate to high levels of risk might find this fund appealing. Its strategy often includes investing in a mix of large, mid and small-cap companies, providing a balanced risk-return profile.
The fund's focus on identifying high-growth companies globally and locally within the consumption theme makes it suitable for those with a longer investment horizon and a willingness to endure short-term volatility for potential long-term gains.
Due to their sector-specific nature, these funds are best suited for investors with a strong belief in the long-term growth potential of the FMCG industry. Investors who are looking to diversify their portfolio with sectoral exposure and are comfortable with the inherent volatility that comes with such focused investments may find these funds appealing.
However, note that these funds focus on carrying a concentrated portfolio related to a specific sector. Ensure they complement your existing portfolio allocation to spread risk.
The Evolving Landscape of the FMCG Industry
The future of the Indian FMCG sector looks bright, driven by a growing middle class, rapid urbanization, and a youthful population with increasing spending power. The sector is set to benefit from rising demand for branded and premium products, with urban consumers driving the need for convenience items.
Government initiatives like ‘Make in India’ support sector growth, though companies must navigate challenges such as inflation, supply chain disruptions, and intense competition. With household and personal care accounting for 50% of FMCG sales in India, the industry is an important contributor to India’s GDP.
Union Budget 2023-24 has allocated USD 976 million for PLI schemes that aim to reduce import costs, improve the cost competitiveness of domestically produced goods, increase domestic capacity, and promote exports.
The FMCG industry has undergone a major transformation in recent years. The rise of digital technology and e-commerce has revolutionized the way products are marketed and sold. Online shopping platforms and direct-to-consumer models have become increasingly popular, enabling brands to reach a broader audience and engage directly with consumers.
The number of internet users in India is likely to reach 1 billion by 2025. It is estimated that 40% of all FMCG consumption in India will be made online by 2030. E-commerce share of total FMCG sales is expected to increase by 11% by 2030.
In addition to technological advancements, there has been a growing emphasis on sustainability and health. Consumers are now more conscious about their choices, leading to a rise in demand for organic products, eco-friendly packaging, and transparent supply chains. This shift has encouraged FMCG companies to innovate and adapt to new consumer preferences.
The FMCG sector is highly competitive, with numerous players vying for market share. Companies need to differentiate themselves through innovation, branding, and customer experience to maintain a competitive edge. FMCG companies need to stay informed of regulatory changes related to product safety, labelling, and environmental standards.
Despite these challenges, the sector’s ongoing emphasis on innovation, sustainability, and consumer-focused strategies positions it strongly for future growth.
To conclude…
Investing in the Indian FMCG sector presents a compelling opportunity given the sector’s robust growth prospects and the underlying consumption story. Both the SBI Consumption Opportunities Fund and the Mirae Asset Great Consumer Fund offer distinct approaches to capturing the benefits of India’s expanding consumer market.
The SBI Consumption Opportunities Fund provides a balanced investment strategy with a focus on established companies across various consumption segments. On the other hand, the Mirae Asset Great Consumer Fund adopts a more aggressive growth strategy, targeting high-growth companies within the consumption sector.
Ultimately, the choice between these funds should align with your investment goals and risk tolerance. Whether you prefer the stability of SBI’s approach or the growth potential of Mirae Asset’s strategy, both funds offer valuable exposure to India’s thriving consumption sector. As the consumption story unfolds, these funds stand as viable options for investors aiming to tap into India’s economic growth and consumer spending trends.
Disclaimer: PersonalFN does not receive any monetary compensation from the fund house or scheme names stated in the article.
This article first appeared on PersonalFN here
