Is it the right time to invest in consumption-themed equity schemes?

Mumbai: Consumption-themed equity schemes are back on investors' radar as cooler valuations and the Goods and Services Tax (GST) tweaks may have set the stage for a rebound.

The Nifty Consumption Index has declined 0.8% over the past year, compared with the Nifty's gain of 3.1%.

"Valuations for the Nifty India Consumption Index now seem fair at 45 times, compared with 60 times during the same time last year, giving long-term investors a good entry point," says Manish Poddar, fund manager, Invesco Mutual Fund.


The government has renewed its push to lift consumption, with measures ranging from the overhaul of the GST rates in eight years to cuts in income-tax slabs. The rationalisation of GST rates - the latest trigger for demand - has lowered levies on a range of mass-consumption items, easing pressure on household budgets and supporting discretionary spending.

"The Indian economy is at a cusp of inflexion when it comes to discretionary consumption," says Venugopal Manghat, chief investment officer - Equity, HSBC Mutual Fund.

Poddar said the consumption sector could likely get a ₹6.75 lakh crore boost over the next couple of years, given the government's interventions that will add to overall household disposable income. Between September 1, 2010, and August 29, 2025, the Nifty Consumption Index Total Returns Index has given 14.9% annualised returns versus 11.8% for the Nifty 50.

Wealth managers, however, caution that thematic bets are volatile and best suited for investors with a high risk appetite, who should allocate only a small part of their portfolio.

"Restrict allocation to 5-10% of the equity portfolio and spread investments over the next six months," says Viral Bhatt, founder, Money Mantra.