``The recent rally has seen the prices of FMCG scrips rise handsomely.

Hence, it does not make sense to launch a fund now which will have to invest in overvalued stocks,'' said an equity analyst.

When launched, this will be the maiden FMCG-specific fund in the country. While the Lever Fund was planned as a closed-end interval fund with a 10-year duration, the FMCG fund will be a open-end growth fund with sale and repurchase of units on a continuous basis. In its earlier avatar, the interval fund was to open forfresh sale and repurchase of units on the first five days of every month.

``A group specific fund would have made the product very volatile. The Indian investor is not prepared for such a scheme where money is put in three or four companies of a specific group - Unilever in this case,'' said a fund analyst. ``A FMCG fund will clearly find favour with a larger section of investors since companies in this sector have and will perform well,'' he added.

The fund will have a minimum investment of Rs 5000 and will offer systematic investment and withdrawal plans. The AMC will charge 1 per cent of the initial issue expenses to the scheme. Besides, the scheme will charge a 1 per cent entry load once it goes open-end. The AMC aims at a portfolio turnover of 75 per cent which means that a scrips in the fund will normally hold a scrip for over one year.

According to the investment philosophy of the fund, investments will be made predominantly in equities of select group of companies in the FMCG sector.

The FMCGthrust of the the fund will automatically include Hindustan Lever and Vasihiti Detergents, which are part of the Unilever Fund. The earlier avatar of the scheme planned to invest upto 70 per cent of the corpus in the Unilever companies - HLL, Vasihiti Detergents and Hind Lever Chemicals.

The Indian FMCG sector can be broadly split into personal care and processed foods. The sector includes areas as diverse as soaps, shampoos, toothpastes to chocolates and rice. Some of the major companies that constitute the FMCG sector are HLL, Britannia, Cadbury, Dabur, Nirma, Ponds (part of HLL now), Henkel Spic, Nestle, Indian Shaving Products and Smithkline Beecham Consumer.

``This is one of the few defensive sectors, insulated from slowdown in the economy. While teh companies in this sector will continue to see a robust growth, given the market size in the country. Besides, the sector has high entry barriers since it is highly brand conscious and hence, competition is not likely to be very stiff,'' said an analyst.