Consumption-based mutual funds deliver 38% return in one year. What should investors do?

Consumption sector-based mutual funds have delivered an average return of 38% in the last one year, an analysis by ETMutualFunds showed. There were around 12 schemes in the consumption category.

Toppers gave more than 40% returns in the last one year, with ICICI Prudential Bharat Consumption Fund leading at 43.87% return. Meanwhile, Tata India Consumer Fund gave a 43.44% return during the same period.



Mahindra Manulife Consumption Fund offered a 41.99% return, followed by Canara Robeco Consumer Trends Fund which surged 41.02% in the said period. Mirae Asset Great Consumer Fund delivered 40.78% return in the last one year.

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ICICI Prudential FMCG Fund, the oldest scheme in the category, offered a 15.07% return in the last one year. The scheme gave 17.40% and 13.53% returns in the last three and five years respectively.

Aditya Birla SL India GenNext Fund, the largest scheme in the category based on assets managed, delivered a 36.51% return in the last one year. The scheme gave 18.74% and 17.91% returns in the last three and five years respectively.

These schemes are benchmarked against Nifty India Consumption - TRI, S&P BSE 100 - TRI, NIFTY FMCG - TRI, and S&P BSE Consumer Discretionary Goods & Services - TRI. These benchmarks gave 42.94%, 34.82%, 18.60%, and 64.36% return in the last one year.

“Positive economic indicators and a sense of optimism about the economy have increased consumer confidence. Also, there has been a significant shift towards discretionary spending. The recent report on household consumption expenditure revealed an uptrend in rural discretionary consumption compared to necessary spending,” said Chakravarthy V., Cofounder and Director, Prime Wealth Finserv.

Stocks falling in the Nifty India Consumption Index have shown positive momentum and mutual fund schemes containing these stocks have benefitted from this surge, said Director of Prime Wealth Finserv.

In the last six months, consumption-based mutual funds have offered an average return of 15.62%. In the last three years and five years, these schemes offered an average return of 20.32% and 17.40, respectively.

Now the question remains if one should invest in these schemes at the current point in time.

“Given the current environment, it may be a favourable time for investment in consumption funds. The government's expected focus on stimulating consumer demand, rural development, and infrastructural push ahead of the elections could create conducive conditions for growth in the consumption sector. However, investors should be mindful of market volatility, especially given the impending elections and the overall global economic climate,” recommends Chakravarthy.

Going forward, what is in store for the consumption sector or the consumption sector-based mutual funds?

“Despite near-term volatility, the optimistic long-term outlook for discretionary consumption remains buoyant. This optimism is partly due to anticipated measures to stimulate consumer demand and spending, especially in rural areas that are lagging behind urban centres,” says Chakravarthy.

He adds, “The consumption space, as highlighted by the performance of the Nifty India Consumption Index, which gained around 30% in a year, reflects the sector's strong returns. This performance is indicative of the robust demand and consumer confidence in the market.”

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ETMutualFunds also compared the performance of these funds against their respective benchmarks. Out of the 12 schemes in the category, nine failed to beat their respective benchmarks in the last one year. In other words, only three schemes managed to beat their respective benchmarks.

Note, all regular and growth option schemes were considered for the study. We calculated one year return from April 2023 to April 2024.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)