Kotak Consumer Fund, which tops the category, has offered 17.97% returns in the last three months. Tata India Consumer Fund posted 16.90% over the same period.
Quant Consumption Fund returned the lowest around 10.42% during the period. ICICI Pru FMCG Fund, the oldest fund in the category, returned 12.15% during the period. Aditya Birla SL India GenNext Fund, the largest fund in the category based on assets under management, has returned 12.79% in the last three months.
According to experts, this performance by the consumption of funds in the last three months is attributed to several factors.
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“One of the main drivers is a good economic environment marked by stable job growth and stable inflation. This combination has led to an increase in consumer spending, creating a supportive background for investment focused on consumption. Strong consumer markets and the resilience of funds that to seize growth opportunities has played an important role in its recent success,” said Chakrivardhan Kuppala, Cofounder and Executive Director, Prime Wealth Finserv. topper in the category, due to strategic asset selection with the consumer sector. The category mainly tends towards large capitalization market capitalization. The category of mutual funds based on the consumption sector holds 59% in large caps, followed by 22.25% in small caps, 14.3% in mid-caps, and 4.46% in others (including cash and cash equivalents).
Market experts believe that small caps and mid-caps are overvalued and large caps are relatively undervalued.
With the focus on the large-cap category, should investors make an allocation to the fund at this time?
“Considering the strong performance and positive outlook for consumer mutual funds, this could be an attractive opportunity for some investors. The growth in the consumer market and the potential for continued economic support suggest that these funds may offer value. However, it is important for investors to do their research yourself and carefully consider your risk tolerance and investment objectives before making a decision,” said Kuppala.
“Market conditions can be dynamic, and what seems promising now may change in the future. Diversification and aligning investments with long-term strategies can be important aspects to consider in this context,” he said.
In the last six months, this consumer sector-based fund has returned an average of 30.99%. Kotak Consumption Fund again stood at the first position in the return chart and offered 41.88% return in the last six months, followed by SBI Consumption Opportunities Fund which gave 36.17% return in the same period.
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Quant Consumption Fund stood last in the return chart and gave 21.69% return in the period.
After looking at the performance of the above mentioned funds, are you interested in investing in these funds? What strategy should you follow?
“When exploring investing in consumer mutual funds, a diversified approach may be worth considering. Spreading investments across multiple mutual funds in the consumer sector can help manage risk and potentially improve returns. Aligning investments with personal financial goals and maintaining a balanced portfolio can is an important step in this process,” said Chakrivardhan Kuppala.
He also warned that, “Keeping track of market trends and reviewing your portfolio regularly can help you make the right decisions. A disciplined long-term strategy, with periodic adjustments if necessary, can help you navigate market fluctuations while aiming for growth.”
Mutual funds based on the consumption sector have been benchmarked against Nifty India Consumption – TRI. In the last three months, Nifty India Consumption – TRI has increased by 11.31%.
According to the latest data available, wholesale price inflation for July eased to a 3-month low of 2.04% on an annual basis as against a 16-month high of 3.36% in June. The positive inflation rate in July 2024 is mainly due to the increase in the prices of food items, manufacturing of food products, mineral oil, crude petroleum & natural gas, other manufacturing, etc. This is a positive factor for the theme of consumption and mutual funds. plan to invest in the theme of consumption.
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Looking forward, what is the outlook for the fund or the consumption sector as a whole?
“The outlook for the consumption sector in 2024 looks relatively positive, with factors such as strong employment growth, stable inflation, and increased consumer spending. Companies in this sector are also shifting their focus to “profitable volumes” instead of relying solely on price increases, which represents a step towards a more innovative and efficient product offering,” said Chakrivardhan Kuppala.
“While this suggests that consumer funds may be well positioned to adapt to market changes, it is important to keep in mind the potential changes in the economic landscape. Investors may wish to stay informed of these evolving dynamics to better understand the opportunities and challenges ahead. in the sector,” he said.
Consumption funds are thematic funds that invest in the equity of companies driven by consumption themes. These funds typically invest in consumer-facing companies that produce goods and services that consumers use. The category includes various consumption-oriented segments such as FMCG, automobiles, telecommunications, and consumer durables.
Mutual fund advisors do not recommend sector or thematic funds to new or inexperienced investors. The scheme is very risky and volatile and the fortune depends entirely on the outlook of the sector or theme. Each sector or theme rises or falls in a certain phase in the economy. Regular investors will find it difficult to time to enter and exit the scheme or wait for their fortunes to change. That is why the scheme is recommended only for experienced or developing investors. However, one should invest only a small percentage of the total portfolio in the scheme.
(Disclaimer: Recommendations, suggestions, ideas and opinions expressed by experts are their own. This does not represent the views of The Economic Times)
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