BETTING ON THE CONSUMPTION STORY: Higher returns with lesser drawdown

financialexpress.com:

In order to offer retail investors a chance to invest in India’s consumption potential, asset management companies are launching consumption funds. These open-ended funds aim to generate long-term capital growth from an actively managed equity portfolio of companies which will benefit from consumption and consumption-related activities.

While HSBC Mutual Fund had launched such a fund in August, Kotak Mutual Fund has launched Kotak Consumption Fund which aims to offer long-term capital growth by investing in firms in sectors such as  fast moving consumer goods, financial services, automobiles, consumer durables, etc. Subscription to Kotak AMC’s new fund offer will close on November 8.

The last two years have seen the consumption sector lagging significantly. But now with elections in five states next month and general elections next year, experts say there will be substantial public spending which will boost consumption. In fact, growth stocks are primarily the driving force behind this sector. So, is it a right time to invest in consumption funds, which are thematic funds and can be very volatile in the short run?

Consumption is generally an evergreen theme and India has always been regarded as a strong domestic consumption market. Also, the move from unorganised to organised and premiumisation are some investment themes on which investors have relied on. The launch of consumption funds underscores the fund houses’ bullish outlook on the consumption sector driven by the belief in India’s robust consumption story. Sonam Srivastava, founder and fund manager, Wright Research, a portfolio management service, says, “Investors’ appetite for consumption funds is high because they see them as a gateway to tap into this evolving