The new ITI Bharat Consumption Fund is perfectly timed to capture expected market rotation into the consumption theme as middle class consumers get much-needed relief in the form of big tax savings from the Budget and rural consumers gradually recover on the back of better monsoons and larger welfare measures.
Rohan says his aim is to populate this new fund with growing consumer businesses that Gen X, Y and Z can relate to. Understanding and relating to portfolio stocks is a time-tested proven strategy to build long term investing conviction among investors.
Rural consumption revival is already evident, urban high end consumption remains robust. The weak link has been urban middle class consumption – which can now bounce back with the large tax benefits announced in the Union Budget and potentially lower interest rates as RBI might soon commence its much awaited rate cut cycle.
While FMCG companies are reporting encouraging revival in volumes which can help drive economies of scale, one has to be careful to understand impact of disruption in distribution through e-commerce platforms on individual companies before making investment decisions in individual stocks.
Rohan currently prefers 2 wheelers and tractors (rural plays) to 4 wheelers (urban play) in the auto segment.
Consumer discretionary remains a strong segment with long growth runways ahead. Markets perhaps got a bit too excited about these runways and took up valuations of some of these stocks to unsustainably high levels –which are now correcting. Rohan will be looking at buying into this correction at valuations he considers reasonable.
Expect this new fund to also have promising growth stories from airlines, hotels, hospitals, healthcare sectors in its portfolio.