As a coalition government takes shape, and as the first budget of the new government is set to be presented next month, the focus areas of the new dispensation, would be keenly watched.

However, there is wide consensus with analysts, and economists calling for a revival in consumption, especially in the rural regions. After concentrating on infrastructure building, and capex spending for many years, there are expectations of the government, looking to spur consumption.

From a market perspective, the consumption theme hasn’t done as well as infrastructure, realty, and manufacturing, and may finally come to party.

The theme spans several sectors. Consumption may be worth considering for investors, especially as factors such as favourable demographics, improving per capita, and disposable income, premiumisation in customer preferences, formalisation in many segments, digitisation etc., provide a strong backdrop for it to outperform.

In this regard, investors can consider the Nippon India Consumption fund for a timeframe of five years or more. The fund was launched in 2004, and has a long track record. Its performance in the last five to seven years, is especially robust, with returns placing it among the best in the category.

Sturdy performance

Nippon India Consumption fund has delivered 2-6 percentage points more than the Nifty India Consumption TRI over the medium to long term, on a point-to-point returns basis. The scheme’s five-year CAGR, of 26.6 per cent, is among the best, compared to peers, and even among many other equity categories.

On a rolling three-year basis over June, 2019, to June, 2024, Nippon India Consumption, has delivered an average return of 26.9 per cent annually, compared to 19.1 per cent, for the Nifty India Consumption TRI, over the same period.

Again, one three-year rolling returns, over the same timeframe, the fund has beaten the benchmark, all the time (100 per cent), and has almost always delivered, more than 20 per cent returns.

If SIP returns (XIRR), are considered over the past five years, the fund has given a robust 30.1 per cent, in this timeframe. An SIP in the Nifty India Consumption TRI, would have managed 24.3 per cent, over the same timeframe.

The scheme has thus been consistent, in delivering superior returns over the past five-plus years.

The fund has an upside capture ratio of 100.9 – based on data over the past three years (2021-2024) – indicating that its NAV rises just about as much as the benchmark during rallies. But, more importantly, its downside capture ratio is only 64.9, suggesting that the fund’s NAV, falls a lot less than the benchmark during corrections. A score of 100, indicates that a fund performs in line with its benchmark.

Juggling segments smartly

The fund invests across market capsz, and therefore does not hesitate to up the stakes in small cap stocks. Nippon India Consumption fund invested as much as 35-38 per cent of its portfolio, in mid, and small cap stocks in the past few years, thus enabling robust performance of the scheme.

However, in recent months, and more so, in the recent May portfolio, large caps account for nearly 67 per cent of the portfolio, while mid, and small caps together make up less than 30 per cent.

The consumption theme spans several sectors. These include FMCG, automobiles, telecom services, healthcare, personal products, beverages, leisure & entertainment, consumer durables, home innovation, and the like.

Nippon India Consumption, used to accord top weightage to FMCG, and consumer durables in the 2021 to early 2023 period. However, as these segments underperformed, the fund has upped the stakes in automobiles, and retailing, which have done well. Other top holdings include segments such as personal products, telecom services, and beverages.

Weightages to individual stocks, is kept less than 5 per cent, (barring the top few firms) of the portfolio, thus ensuring diffused holdings.

Nippon India Consumption, remains invested across all periods, and takes cash positions of only 3-4 per cent.

Being a thematic fund, it is suitable for investors, with a medium to high-risk appetite.

Investors can consider taking exposure to the fund, as a part of their satellite portfolio via small lump-sums. Investments via the SIP mode, with a time horizon of 7-10 years, could also work well for those wanting to buy across market cycles.

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