ICICI Prudential’s new Bharat Consumption Fund – Series I comes at a time when global and local factors are likely to keep markets choppy over the next 12-18 months. Times like these are usually when one turns to defensives like the consumption theme. Read on as Naren shares his perspectives on markets and the rationale for this fund at this time.

WF: Is it reasonable to deduce from the launch of a consumption oriented fund that prospects for the cyclical recovery which was being hoped for looks a little challenging now and that domestic consumption seems to be on balance a more attractive proposition?

Naren: Due to a combination of domestic and global factors, we believe that there is a scope of volatility in the market. Hence we decided to launch a more defensive theme product.
We believe, the advantage here is that you can invest in sectors like consumer staples, healthcare which are defensive, auto and consumer durables along with sectors which are cheap on a valuation front and have also been under pressure like telecom and power, coupled with good stock picking in sectors like media.

WF: How is the earnings growth story panning out in key consumption sectors and how do valuations appear now vs. historical averages in this theme?

Naren: There has been a steady earnings growth in the sector over the last 6-7 years, except for times when there have been event-based issues which are not structural in nature. So, the consumption sector has been steady on the earnings growth front. Therefore, even though the sector is relatively inexpensive, the scheme aims to invest in stocks which offer reasonable margin of safety.

WF: Out of the broad consumption theme, which segments appear more attractive now and why?

Naren: Under the consumption theme, a variety of sectors are under consideration.

The stocks/sectors mentioned in this presentation is only for illustration purpose only. The stocks mentioned herein are a part of the scheme benchmark i.e Nifty India Consumption Index. The sector(s)/stock(s) mentioned in this presentation do not constitute any recommendation of the same and ICICI Prudential Mutual Fund may or may not have any future position in these sector(s)/stock(s).The portfolio of the scheme is subject to changes within the provisions of the Scheme Information document of the scheme. Please refer to the SID for investment pattern, strategy and risk factors.

We feel health care is broadly attractive; media is attractive on a stock selection basis, while telecom and power are very attractive on a valuation basis with a long-term view. Within the auto sector, the outlook for specific companies appears to be reasonable.

We believe the sectors that can benefit from the consumption theme are::

Source: Auto Motive Mission Plan 2016-26, IDFC Securities. The stocks/sectors mentioned in this Presentation is only for illustration purpose only. The stocks mentioned herein are a part of the scheme benchmark i.e Nifty India Consumption Index. The sector(s)/stock(s) mentioned in this presentation do not constitute any recommendation of the same and ICICI Prudential Mutual Fund may or may not have any future position in these sector(s)/stock(s).The portfolio of the scheme is subject to changes within the provisions of the Scheme Information document of the scheme. Please refer to the SID for investment pattern, strategy and risk factors.

Source: Kantar worldpanel india, World Bank, AC Nielsen, ibef.org. E : Estimate. The stocks/sectors mentioned in this Presentation is only for illustration purpose only. The stocks mentioned herein are a part of the scheme benchmark i.e Nifty India Consumption Index. The sector(s)/stock(s) mentioned in this presentation do not constitute any recommendation of the same and ICICI Prudential Mutual Fund may or may not have any future position in these sector(s)/stock(s).The portfolio of the scheme is subject to changes within the provisions of the Scheme Information document of the scheme. Please refer to the SID for investment pattern, strategy and risk factors.

Source: World Bank, CITI Research. The stocks/sectors mentioned in this Presentation is only for illustration purpose only. The stocks mentioned herein are a part of the scheme benchmark i.e Nifty India Consumption Index. The sector(s)/ stock(s) mentioned in this presentation do not constitute any recommendation of the same and ICICI Prudential Mutual Fund may or may not have any future position in these sector(s)/stock(s).The portfolio of the scheme is subject to changes within the provisions of the Scheme Information document of the scheme. Please refer to the SID for investment pattern, strategy and risk factors.

WF: Between urban and rural consumption, where would you place larger bets now and why?

Naren: Since it is a pre-election phase, we would prefer rural consumption theme over urban consumption. Also, rural consumption hasn’t done well in the last 3-5 years. Hence, we believe that there is better scope for outperformance here.

WF: Many investors tend to be influenced by near-term market performance when investing in equity funds – whether open or close-ended. In that context, how do you read the current round of volatility and what is your prognosis for the coming 12 months?

Naren: We believe that the market can be volatile over the next 12-18 months due to global and domestic factors. This is a regular part of any market cycle, where after seeing four good years (2014-17) we go through a phase of volatility.

WF: For investors who may want to “wait on the sidelines” for a better entry point amidst this correction, what is the case for investing in this fund now?

Naren: We have for long believed that there are three ways to invest when the market cycle becomes advanced. One is investing in Mutual Fund category like dynamic asset allocation schemes, second is to invest in close-ended funds which invest in interesting themes and third is to invest in debt Schemes. The launch of this Scheme comes as a part of that belief.

The stocks/sectors mentioned in this presentation is only for illustration purpose only. The stocks mentioned herein are a part of the scheme benchmark i.e Nifty India Consumption Index. The sector(s)/stock(s) mentioned in this presentation do not constitute any recommendation of the same and ICICI Prudential Mutual Fund may or may not have any future position in these sector(s)/stock(s).The portfolio of the scheme is subject to changes within the provisions of the Scheme Information document of the scheme. Please refer to the SID for investment pattern, strategy and risk factors.

Riskometer & Disclaimer

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

The information contained herein is only for the reading/understanding of the registered Advisors/Distributors and should not be circulated to investors/prospective investors. All data/information in this material is specific to a time and may or may not be relevant in future post issuance of this material. ICICI Prudential Asset Management Company Limited (the AMC) takes no responsibility of updating any data/information in this material from time to time. The AMC (including its affiliates), ICICI Prudential Mutual Fund (the Fund), ICICI Prudential Trust Limited (the Trust) and any of its officers, directors, personnel and employees, shall not liable for any loss, damage of any nature, including but not limited to direct, indirect, punitive, special, exemplary, consequential, as also any loss of profit in any way arising from the use of this material in any manner. The sector(s)/stock(s) mentioned in this communication do not constitute any recommendation of the same and ICICI Prudential Mutual Fund may or may not have any future position in these sector(s)/stock(s). Past performance may or may not be sustained in the future. Nothing contained in this document shall be construed to be an investment advise or an assurance of the benefits of investing in the any of the Schemes of the Fund. Recipient alone shall be fully responsible for any decision taken on the basis of this document

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