By the time all key state governments announce their respective welfare measures, the annual outlay will likely increase from the current Rs. 3 lakh cr to upwards of Rs. 4 lakh crs. Add the Rs.1 lakh cr of tax breaks from the Budget, and consumers get an annual Rs. 5 lakh cr into their pockets.
India’s annual consumption of Rs.180 lakh crs will see meaningful growth in some segments on the back of this incremental disposable income.
Shridatta cautions that these welfare payouts haven’t yet created the kind of growth delta in recent months as was expected, because this segment came out of covid with badly dented personal finances which led to increased borrowings in these households – which are now getting paid off with this incremental income. Consumption boost can happen only after some de-leveraging.
Consumption themed stocks are in a sweet spot with volume growth visibility, earnings growth expectations that are not yet fully baked into prices and valuations which are at long term averages.
Canara Robeco’s Consumer Trends Fund is one of the oldest in this category, with over 15 years of track record of outperforming its benchmark BSE100TRI.
Lower ticket consumer discretionaries are likely to be big beneficiaries going forward. These will include 2 wheelers and low-end cars in the auto segment, consumer durables, value end of apparel, footwear and other such discretionary products.
Within staples, alcobev, general beverages and packaged foods segments are on a stronger footing compared to traditional personal care and food staples where the majors are seeing intense and growing competition from smaller and nimble players.
The fund has 30% allocation to large banks and consumer lending NBFCs – which Shridatta says play directly into rising consumption as large portions of discretionary spending are financed by these banks and NBFCs.