It has happened at least four times in the last six months. The Nifty corrected very sharply, but one sectoral index traded in the green that day – the FMCG Index. Money, came the explanation, moves to “defensive stocks” in times of uncertainty. So, one question is: Should you buy FMCG stocks because they are considered defensive – those that fall relatively less in a volatile market? Or should they be bought because, after a good monsoon, there are signs of recovery in rural India. That means a greater likelihood these companies will report an improved quarterly performance. There is also a more fundamental question: Given that the Indian economy has changed and new sectors with better and more stable growth have emerged, should FMCG stocks be even considered defensive stocks? Or should the label be reserved for a new set of stocks?
