The new Bank Of India Consumption Fund’s portfolio will comprise 3 segments of stocks based on growth trajectory: (1) stable growth (10-12% earnings growth) – which bring stability and resilience to the portfolio, (2) extended growth (15-16% earnings growth) and (3) evolving growth (20-25% earnings growth).
The portfolio will have higher allocations to the 2ndand 3rd categories, which will give the portfolio an earnings growth profile in the high teens – and thus set it up for likely robust long term wealth creation as markets eventually track earnings growth.
The portfolio will be sharply growth focused (unlike conventional wisdom that slots consumption into the defensive category) as Nitin sees long growth runways for a large variety of businesses across multiple sectors as aspirational India incrementally moves up the discretionary consumption curve each year.
Huge thrust on infrastructure growth and manufacturing revival will naturally result in more jobs, higher incomes and therefore higher consumption growth.
While India is still witnessing a K shaped household income growth coming out of covid, the top end of the K is large enough in absolute numbers (though smaller in percentage terms) to drive healthy growth across diverse discretionary spending categories.
While caution is warranted in some high margin staples businesses and middle class oriented discretionary products, the advent of value-for-money competitors spells new opportunities as they grow large enough to get listed.