CONSUMPTION FUND: REASONS TO INVEST

Over the years, one of the key parameters I've used to gauge the trajectory of the market has been consumption patterns.

- ASHOK KUMAR

More often than not, visible discretionary spending is a sign of an economy on the upswing, and the stock market usually would have discerned and discounted it early. It is in this context that I find consumption mutual funds offered by asset management companies (AMCs) and their holdings interesting.

By definition, consumption funds are thematic MFs that invest in companies directly connected to consumer spending. These funds focus on businesses that produce or sell goods and services used in daily life. This includes sectors like food and beverages, clothing, automobiles, consumer electronics, retail, hospitality, personal care, and entertainment, besides other segments. As consumption rises, the companies that provide these goods and services tend to grow more profitable.