Consumption Funds: Only 2 Beat 10% SIP Returns in 3 Years
By Market Desk
Discover why only two out of 37 Indian consumption funds surpassed 10% SIP returns in three years. Explore fund performance and stock selection impact.
Thematic consumption mutual funds, which are funds focused on specific consumer industries, in India showed wildly different performance over the past three years. Only two out of 37 such funds managed to give over 10% SIP returns, while one delivered less than 1%.
Key Fund Returns
- HSBC Consumption Fund: 12.33% SIP returns
- Tata India Consumer Fund: 12.20% SIP returns
- SBI Consumption Opportunities Fund: 0.42% SIP returns
Nilesh D Naik, Head of Mutual Funds at PhonePe, explained that this huge difference came down to varied stock choices within the consumption sector. The Nifty Consumption Index, which is an index tracking consumer stocks, averaged 18% absolute return, but its top stocks grew 38% while bottom ones saw almost zero growth.
How Funds Differed
- HSBC Consumption Fund’s top holdings included Eternal, Bharti Airtel, Radico Khaitan, Maruti Suzuki, and Titan.
- SBI Consumption Opportunities Fund’s top holdings were Mahindra & Mahindra, Asian Paints, Maruti Suzuki, Jubilant FoodWorks, and Berger Paints.
Both funds hold around 50 stocks, with consumer discretionary being the main sector. However, their specific stock picks were quite different. The auto sector performed strongly in the consumption category, but some Fast-Moving Consumer Goods (FMCG) companies did not do as well over the last three years.
Naik also noted that passive funds, which are funds tracking an index, follow market capitalization. Active managers, who are people picking stocks, make choices based on their own security assessments. He stated there is no clear trend showing one style performs better than the other.
Thematic Fund Risks
- Investing based on past performance can be misleading.
- These sectors are highly cyclical.
- Thematic investing carries much higher risk than diversified funds.
- Historically, sectors like infrastructure and technology took nearly a decade to recover from big market drops.
Investors should be careful with thematic funds, as their high risk and cyclical nature mean past returns don’t guarantee future success.