Introduction: 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 st January 2010 to 31 st 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. Methodology 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 co-variance. Analysis and Interpretation The data collected for the study analysed by using Return, Risk, Beta, Alpha and Correlation. Return: 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
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 th
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.
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.
Risk 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) 2 / n-1 Table 4 Standard Deviation of the Select Companies Company Calculation SD Britannia SD of Market 343.56 / 42-1 2.98 SD of Britannia 119.63 / 42-1 1.70 HUL SD of Market 343.56 / 42-1 6.13 SD HUL 119.635 / 42-1 4.82 ITC SD of Market 356.78 / 42-1 6.13 SD ITC 298.95 / 42-1 5.49 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 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 calculation. (Beta) = NXY-(X)(Y) / NX-(X)
Table 5 Beta of the Select Companies
Company Calculation (Beta) Britannia (42*6.352) - (-56.2)(-0.87) 54(0.9069) - (-56.2) 141.763 / 10038.29 0.0141 HUL (42*6.352) - (-56.2)(-0.87) 42(650.73) - (-58.7) 43491 / 107848.31 0.4033 ITC (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.
Alpha 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.
Correlation 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) nx 2 (X) 2 nY 2 -(Y) 2
Table 9 Beta of the Select Companies Company Calculation Correlation Britannia 42*6.352- (-56.2)x(-1.57) 0.8951 42*0.9069-(-56.2) 2 54*119.63-(-1.57) 2
HUL 42*432.78-(-58.7)*(13.52) 0.514 42*650.73-(-58.7) 2 42*1235-(13.52) 2
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.
Findings 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 downs. 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.
Suggestions 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 stocks. 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.
Conclusion 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 shares. 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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