Consumption funds: Rate cuts to boost growth, but enter with long horizon

Tax relief in Budget, multi-year low inflation and rural recovery are other tailwinds

In yet another move to boost consumption demand, the Reserve Bank of India (RBI) cut the repo rate by 50 basis points on June 6, marking a total reduction of 100 bps since the beginning of the year. Lenders lowering rates in response is set to stimulate the economy. Higher consumption will drive economic growth, while also enhancing the performance of funds focused on consumption.

 

“Consumption funds are a good proxy to play on India’s positive demography, the structural theme of rising per capita income, and low penetration levels across several consumption categories,” says Navin Matta, fund manager - equity,