Indian Market Analysis: Consumption Vs. Extraction

Indian FMCG Market Analysis

We do understand that Investing being game of odds, market participants would prefer to pay a premium for ‘certainty’ in earnings, growth etc. But the same question also then logically extends to expensive valuations. One has to be mindful of the fact that as much as the behavioral biases of the market might lead us to think otherwise, prospective returns essentially are a function of arithmetic calculations and not any story built around an investing idea/theme.

With that thought we set out to capture this ‘certainty’ premium gap in an objective manner and chose two sectors facing diagonally opposite headwinds/tailwinds currently: FMCG and mining. We infer that greed and fear of market participants is certainly in play. Also, it is very important for an investor to rationally deduce, if Mr. Market offers a trade whereby prospective return (in one sector) outweighs the ‘certainty’ premium (in other).


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