Citing the continuing 'cyclical turnaround' in the economy and the 'positives' in Union Budget for 2003-04, mutual fund Franklin Templeton has said the FMCG segment was in for better times.

The fund, which added Procter and Gamble to its portfolio and had invested around Rs 18 crore (Rs 180 million) under its fast moving consumer goods scheme, had considerable exposure in leading corporates like Hindustan Lever, Asian Paints, Marico, Zee Telefilms and Tata Tea, even as it cut exposure in ITC and United Breweries, its latest monthly report said.

"The FMCG sector, which had been under pressure in recent years, could be in for better times in the coming quarters," Templeton said.

Reasoning for its optimism, the fund said it was due to the cyclical turnaround in the economy as well as the positive impact the budget could have on the FMCG segment owing to reduction in excise and customs duties and introduction of value-added tax.

Templeton's FMCG scheme had around 22 per cent exposure in tobacco major ITC, while it had an exposure of near 21 per cent in HLL, near nine per cent in Asian Paints and Marico and over 6 per cent in Zee Telefilms and Tata Tea.

Listing out the direct benefits for the FMCG sector, the fund cited the halving of excise duty on biscuits and sugar boiled confectionary to 8 per cent, reduction of excise duty on several toiletry items like after-shaves and on air conditioners and aerated waters and cut in peak customs duty on raw material as titanium dioxide, which could help the paints industry.

"The reduction of duties (excise and customs) across the sectors could result in increasing the purchasing power of the Indian consumer, spurring demand. The rationalisation of excise duty structure is a structural positive," Templeton said.

On the other highlights of the Union Budget for the next financial year, the fund said: "The introduction of VAT from April will help the FMCG companies, as tax ambiguity reduces."

The other FMCG entities that had less than 6 per cent exposure in its scheme included Godrej Consumer, Dabur, Nirma, SmithKline Consumer, Britannia, Colgate Palmolive, Ind Shaving and Bata.

The FMCG scheme, with a net asset value of Rs 10.47 on a face value of Rs 10 per unit, seeks to provide long-term capital gain appreciation by investing primarily in the shares of companies operating the FMCG industry.