Mar 22, 2018 3 min read

NFO Launched: ICICI Prudential Bharat Consumption Fund – Series 1

You can now earn by investing in the long-term consumption growth of India with ICICI Prudential Bharat Consumption Fund - Series 1.
ICICI Prudential Bharat Consumption Fund is a close-ended fund which aims to gain from India’s rising consumer market. The AMC has launched a new NFO targeting the GDP growth rate which is expected to gain significant pace due to India’s demographic dividend.

The fund will benefit from rising demand of the consumable goods like phones, cars, ACs, packaged food, clothes, and cosmetics in the country. The overall theme resembles the investment style of the recently launched Aditya Birla Resurgent India Fund (Series 6) with added perks of consumer non-durables.

The fund can freely invest in large, mid, and small-cap stocks with investment tenure of about 3.5 years. The scheme will be managed by industry veteran Mr. Sankaran Naren, the Executive Director of ICICI Prudential Asset Management Company and co-managed by Mr. Atul Patel and Ms. Priyanka Khandelwal who have been with ICICI Mutual Fund since 2009 and 2014, respectively.

Why Consumption?

  • Nuclear Families 
    The fund acknowledges that the family structure in India is shifting towards nuclear families. Consequently, it will increase the number of households and hence the demand for consumable goods. This shift is significant to the market as nuclear families spend 20-30% more per capita than joint families.
  • Rural Catch-up 
    With government’s focus on lifting rural income and increase in penetration through mobile and technology, the rural consumption is converging with urban consumption.
  • Defensive Bet 
    We can divide our nation’s GDP into three components – government spending, consumption, and investment. On account of historical data, consumption has been generally the steadiest component while the other two tend to be highly sensitive to the economic cycles, geopolitics, and/or interest rates. A bet on consumption sector can thus turn out to be a ‘defensive’ bet in the economic downturn.

Investment Strategy

Following the theme of domestic consumption, the fund will invest in the sectors like Consumer Durables (TVs, ACs, etc.), Consumer Non-Durables (biscuits, packaged food, etc.), Healthcare, Auto, Telecom Services, Pharmaceuticals, Hotels, Media & Entertainment, etc. The investment is strategized with regards to the anticipated growth of consumer sectors. The reason behind investing in this theme is that the consumer durables sector is expected to reach USD 46.54 billion and consumer non-durables market is expected to grow USD 103.7 billion by 2020.

Expert’s Take

Looking at India’s fast pace growth and increase in the consumer spending; the consumption sector has a long-term story which makes it a safe bet. In contrast to the expanding and liquid nature of the consumer goods companies, this closed-ended fund will invest more efficiently without the threat of large outflows. Although the consumer stocks are generally expensive, we trust the fund manager’s stock picking skills which ensure to reduce the risk at the market peaks by using hedging strategies.

We suggest investing in this fund if you want to avoid the lure and stress of investing and exiting the open-ended sector funds.

Key Details

To invest in ICICI Prudential Bharat Consumption Fund - Series 1, visit the link right now.

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