Bet on the GST rate-cut theme

AS SPENDS GET A BOOST, CONSUMPTION FUNDS ARE LIKELY TO GIVE BETTER RETURNS

- SAIKAT NEOGI

INDIVIDUALS CAN CONSIDER investing in consumption funds now as a likely cut in Goods and Services Tax (GST) rates, coupled with monetary policy easing and reduction in personal income tax rates, will boost spending. These open-ended funds invest in firms which benefit from consumption-related activities.

Companies in sectors like fast-moving consumer goods, durables, automobiles will benefit from increased consumption and higher earnings. An individual can position his portfolio to potentially benefit from the anticipated rise in consumption-based companies' earnings, which often occurs when such positive regulatory changes are implemented.

Over a three- to five-year period, consumption funds have compounded at 16-22% annually, meaningfully ahead of broad diversified categories. This demonstrates the power of structural consumption drivers even if near-term performance is volatile. "This is a strategic move to capitalize on the early stages of this growth cycle," says Soumya Sarkar, co-founder, Wealth Redefine, an AMFI registered mutual fund distributor.