Consumption funds likely to pick up pace as economy recovers

Consumption funds, which invest in stocks of companies that are driven by the consumption behaviour, have given average returns of 30 per cent in the last one year. Consumption as a theme is likely to improve once economic recovery picks up, feel market participants.

The data from Value Research shows that some consumer thematic funds have given returns of 30-57 per cent in the last one year. Quant Consumption Fund has returned 57.03 per cent, while Mirae Asset Great Consumer Fund has generated returns of 35.19 per cent in the last one year. S&P BSE Sensex has given returns of 24.02 per cent in the same period.

Mahesh Patil, chief investment officer at Aditya Birla Sun Life Asset Management Company, said the economy is recovering quickly as evidenced by strong macro data — a better-than-expected gross domestic product (GDP) growth, PMI consistently in expansion zone, improved core sector growth, GST collections of above Rs 1.3 trillion for the sixth consecutive month and a falling unemployment rate.

“Over the next three years, we believe India is likely to go back to its real GDP growth trend of 6.5 per cent with all three (consumption, finance and exports) drivers of economy firing. Discretionary consumption is picking up post-Covid and should sustain given the young demographic with rising incomes and aspiration levels,” said Patil.

Typically, consumption funds invest in fast moving consumer goods, consumer durables, consumer discretionary, and auto companies. But in the last few years, some of the funds have also invested in finance stocks, which has helped them deliver better returns.

Shridatta Bhandwaldar, head - equities at Canara Robeco Mutual Fund, said: “The allocation and selection of stocks has helped us. Apart from investing in non-auto discretionary and consumer durables, we have invested in the financial sector as we believe it is an integral part of consumption and that call has played significantly.”

Canara Robeco Consumer Trends Fund has delivered returns of 31.28 per cent in the last one year. Over a seven-year period, the fund has given returns of 17 per cent, shows the data from Value Research.

Even in the longer duration, consumption funds have given positive returns. Market participants say that with favourable demographics, increasing per-capita income and reforms in India, consumption as a theme will continue to deliver good returns.