Consumption Fund: Invest in India Consumption Story

The India Consumption Story is an integral part of the India Growth Story since India is largely a domestic consumption-based economy. In FY 2023-24, India’s share of consumption is around 56% of the GDP (source: Economic Survey).

There is a huge potential and a long runway for consumption growth in India. There are few consumption sector-oriented funds that could provide higher compounded returns as compared to others.

What is driving consumption growth?

1. India's Global Standing in Consumption Markets

   • India ranks as the fifth largest consumer market, trailing only the United States, EU, China, and Japan (source: World Bank, 2023).

   • India is the second largest smartphone market globally, projected to reach $90 billion by 2032.

   • The food services market is set to grow by over 50% by 2029.

   • The country leads the world in two-wheeler sales, fueled by rural and semi-urban demand.

2. Rising Income Levels

   • India's average GDP per person has risen from sub-$1,000 levels in the mid-2000s to approximately $2,857 in 2024 (source: PHD Research Bureau).

   • Over the next seven years, per capita income is expected to double, marking a shift in consumption patterns:

     • Below $2,000, spending focuses on basic needs.

     • Above $2,000, spending shifts to comfort and luxury.

   

   Source: PHD Research Bureau, Bajaj Finserv MF

3. Growing Upper Middle and High-Income Segments

   • An increasing percentage of the population is moving into upper-middle and high-income brackets, accelerating discretionary spending.

   

   Source: Bajaj Finserv MF

4. Reduced Rural-Urban Divide

   • Rural consumption is rising, narrowing the rural-urban inequality gap.

   • This trend has bolstered household consumption across categories.
     

   

   Source: Bajaj Finserv MF

5. Shifts in Spending Patterns

   • As incomes rise, a higher proportion of earnings is allocated to comfort, luxury, and quality:

     • The market share of hatchback cars has dropped from 48% to 34%, while sedans and SUVs surged from 39% to 53%.

     • The SUV segment witnessed exponential growth, climbing from 15% to 43% market share.

   

   Source: Bajaj Finserv MF

6. Explosive Growth in Quick Commerce

   • Quick commerce gross merchandise value grew from $40 million in 2019 to $2.4 billion in 2023, with projections of a CAGR of 60-80% by 2028.

Consumption as an investment theme has outperformed the market

The chart below shows the growth of Rs 10,000 investment in the Nifty India Consumption TRI versus the broad market index Nifty 500 TRI. You can see that the Nifty India Consumption TRI has outperformed Nifty 500 TRI.

Stronger fundamentals compared to the broad market index

Investment Strategy of Consumption Fund

Why invest in a Consumption Fund?

• Outperformance of the Consumption Theme
  Historical data shows that consumption funds (e.g., Nifty India Consumption TRI) have outperformed broader market indices like Nifty 500 TRI.

• Stronger Fundamentals
  Consumption-oriented funds boast robust fundamentals, making them a compelling choice for long-term wealth creation.

• Lifestyle Shifts

  • Increasing online shopping habits (e.g., Amazon, Meesho, Swiggy, Zomato).

  • Rising preference for luxury and quality over basic necessities.

• Supportive Savings Trends

  • SIP adoption fosters confidence in sustaining future lifestyles, creating a positive loop for consumption and investment.

Mutual Fund Investments are subject to market risk, read all scheme related documents carefully.

India's consumption story is poised for exponential growth, driven by rising incomes, changing lifestyles, and a narrowing rural-urban divide. Consumption funds present a unique opportunity to participate in this transformative journey while benefiting from historical outperformance and strong fundamentals.

For further enquiry, you can get back to us at [email protected].

Warm regards,

Tejas