Powering Everyday Life: How Consumption Funds Benefit from Rising Consumer Demand

Consumption is a fundamental pillar of economic growth, driving the momentum that fuels industries and markets worldwide. As consumers increasingly spend on goods and services, specific sectors flourish, creating a ripe environment for investors to tap into this potential. Let’s explore how consumption funds capitalize on rising consumer demand and why they can be a strategic addition to a diversified investment portfolio.

Consumption & economic growth

Consumption is a critical driver of economic activity, contributing significantly to GDP in many economies. When consumers spend, it stimulates production, creates jobs, and fosters innovation.
The cycle of spending and growth underscores the vitality of consumer demand in sustaining economic expansion. As disposable incomes rise and consumer confidence improves, spending on various goods and services increases, boosting economic development.
According to a report by UBS, the Indian economy is expected to emerge as the world's third-largest consumer market by 2026. In 2023, India’s consumption grew at a faster pace than that of China, US, and Germany .

Consumer industries that are roaring

Several industries are at the forefront of benefiting from heightened consumer demand. Fast-moving consumer goods (FMCG), e-commerce, and travel are particularly notable:

• FMCG: This sector includes essential products such as food, beverages, personal care, and household items. These goods are in constant demand, making the FMCG sector resilient and continually growing. Indian FMCG market size was valued at $230.14bn in 2023, and the total revenue is expected to reach nearly $1288.52bn by 2030 .
• E-commerce: The shift towards online shopping has revolutionized the retail landscape. Convenience, variety, and competitive pricing have driven e-commerce to unprecedented heights, making it a significant growth area. The Indian e-commerce market is predicted to balloon to a whopping $325 billion by 2030. At present, the e-commerce market is valued at $70 billion .
• Travel and Hospitality: With increased disposable incomes and a desire for experiences over possessions, the travel and hospitality industry has seen robust growth. From domestic tourism to international travel, this sector is thriving. In 2023, the value of India’s travel market was estimated at $78 billion. The country’s travel industry is forecasted to grow to $131 billion by 2030.

Tapping the opportunity with Consumption Funds

Investors can capitalize on the growth of consumer-driven industries by considering consumption funds. Consumption funds are a type of thematic mutual fund that invests in companies that are driven by consumption behavior. This theme is propelled by macroeconomic trends and structural shifts in consumer lifestyles and preferences.

These funds offer a diversified portfolio of consumer-focused companies, providing exposure to this dynamic industry. Unlike broader market funds, consumption funds concentrate on consumer-related sectors, leveraging unique growth drivers. This targeted approach can lead to higher returns during robust consumer spending periods.

Consumption funds can generate long-term capital growth from an actively managed portfolio of companies engaged in or expected to benefit from consumption. Consumption funds typically invest in sectors such as retail (department stores, specialty retailers, online platforms), food and beverage (producers and distributors), consumer durables (electronics, home appliances, automobiles), etc. By diversifying across these sectors, they capture varied opportunities within the consumer economy.

Wrapping up

As consumer demand continues to rise, consumption funds offer a strategic avenue for investors to capitalize on this trend. By focusing on industries directly influenced by consumer spending, these funds provide a targeted approach to investing in economic growth. As always, the investors must conduct thorough research and consider their risk tolerance and investment goals.

By understanding the dynamics of consumer demand and strategically investing in consumption funds, investors can make informed decisions that align with their long-term financial aspirations.

This document represents the views of Axis Asset Management Co. Ltd. and must not be taken as the basis for an investment decision. Neither Axis Mutual Fund, Axis Mutual Fund Trustee Limited nor Axis Asset Management Company Limited, its Directors or associates shall be liable for any damages including lost revenue or lost profits that may arise from the use of the information contained herein. No representation or warranty is made as to the accuracy, completeness or fairness of the information and opinions contained herein. The AMC reserves the right to make modifications and alterations to this statement as may be required from time to time. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.

Statutory Details: Axis Mutual Fund has been established as a Trust under the Indian Trusts Act, 1882, sponsored by Axis Bank Ltd. (liability restricted to Rs. 1 Lakh). Trustee: Axis Mutual Fund Trustee Ltd. Investment Manager: Axis Asset Management Co. Ltd. (the AMC). Risk Factors: Axis Bank Limited is not liable or responsible for any loss or shortfall resulting from the operation of the scheme.

Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.

________

https://economictimes.indiatimes.com/news/economy/indicators/india-to-emerge-as-third-largest-consumer-market-by-2026-report/articleshow/109924919.cms?from=mdr
https://www.maximizemarketresearch.com/market-report/indian-fast-moving-consumer-goods-fmcg-market/29038/
https://www.financialexpress.com/business/industry-indian-ecommerce-market-to-grow-to-325-billion-digital-economy-to-reach-800-billion-by-2030-3470164/#:~:text=At%20present%2C%20the%20e%2Dcommerce,accessing%20the%20internet%20in%202022.
https://www.statista.com/statistics/750856/india-travel-market-size/#:~:text=The%20value%20of%20travel%20market,dollars%20by%20financial%20year%202030.