In one month, the Nifty India Consumption Index surged 6.51%, and in three months the index gained 11.65%. The wholesale price inflation declined for the consecutive 11th month in April. This decline is primarily contributed by the fall in prices of basic metals, food products, mineral oils, and other products. Wholesale price inflation was (-) 0.92% in April against 1.34% in March. This was a positive factor for the consumption theme and the mutual fund schemes investing in the consumption theme.
There were around 16 schemes in the category. Tata India Consumer Fund offered the highest return of around 7.27% in one month, followed by Baroda BNP Paribas India Consumption Fund. The scheme offered 6.64% return. In three months, Mirae Asset Great Consumer Fund offered the highest return of around 12.76%.
Most of these schemes have managed to offer double-digit returns in the three-month horizon. Only Aditya Birla Sun Life India GenNext Fund, ICICI Prudential Bharat Consumption Fund, SBI Consumption Opportunities Fund, and Sundaram Consumption Fund offered single-digit returns in the three-month horizon.
Consumption funds are thematic funds that invest in equities of companies that are driven by consumption themes. These funds typically invest in consumer-facing companies that produce goods and services used by consumers. The category consists of different consumption-oriented segments such as FMCG, automobiles, telecom, and consumer durables.
Mutual fund advisors do not recommend sector or thematic funds to new or inexperienced investors. These schemes are extremely risky and volatile and their fortunes depend entirely on the prospects of the sector or theme. Every sector or theme goes up or down in certain phases in the economy. Regular investors would find it difficult to time their entry and exit in these schemes or wait for the fortunes to change. That is why these schemes are recommended only to seasoned or evolved investors. However, one should invest only a small percentage of the total portfolio in these schemes.
