After many years of expecting relief on the income tax front, Union Budget 2025 finally came up with measures that ensure considerable surplus for the salaried middle class.
With liberal slabs and relatively lower slab rates, the Finance Minister’s announcement is set to leave ₹1 trillion in the hands of taxpayers, thus creating an atmosphere to jumpstart the slowing consumption in the economy.
Even otherwise, many segments in the consumption theme have seen key stocks correcting 20-30 per cent at least, with even those considered as defensive facing the brunt of the falling markets over the past four months. Even earlier, sectors such as FMCG, retail and automotive were relative underperformers. Thus, some degree of valuation comfort has emerged in many segments with extreme pessimism being factored in.
The budget’s moves, the announcement of the eighth pay commission for government employees and the relatively attractive positioning of the consumption theme make the case for investment from a 5-7-year perspective.
The theme spans several sectors. From a broader macroeconomic perspective, consumption may be worth considering for investors as factors such as favourable demographics, improving per capita and disposable incomes, premiumisation in purchases, formalisation and digitisation provide a long runway for the theme’s growth.
In this regard, investors can consider the ICICI Prudential Bharat Consumption fund for a timeframe of five years or more. The fund was launched in 2019 and has performed well over the past five-odd years and is among the best in its category.
Durable performer
ICICI Prudential Bharat Consumption fund has consistently done well against the Nifty India Consumption TRI index, since its inception.
On a rolling three-year basis from April 2019 to January 2025, ICICI Prudential Bharat Consumption has delivered an average return of 21.4 per cent annually, compared to 19 per cent for the Nifty India Consumption TRI, over the same period.
Again, on a three-year rolling returns over the same period, the fund has beaten the benchmark a healthy 88 per cent of the time.
The fund has managed to deliver more than 15 per cent returns over 92 per cent of the time and in excess of 18 per cent for almost 75 per cent of the time.
If SIP returns (XIRR) are considered over the past five years, the fund has given a robust 21.3 per cent in this timeframe. An SIP in the Nifty India Consumption TRI would have managed 19.6 per cent over the same five-year period.
The scheme has thus been consistent in delivering superior returns over the past five-plus years. These data points pertain to the direct plan of ICICI Prudential Bharat Consumption.
The fund has an upside capture ratio of 85.9 – based on data over the past three years (Jan 2022-2025) – indicating that its NAV rises less than the benchmark during rallies. But more importantly, its downside capture ratio is only 55.9, suggesting that the fund’s NAV falls a lot less than the benchmark during corrections. A score of 100 indicates that a fund performs in line with its benchmark.
Mixing sectors smartly
ICICI Prudential Bharat Consumption fund invests across market caps. Hence, it would not be uncommon to fund mid and small caps in significant proportions in the scheme. Of course, the fund is biased towards large caps with such stocks accounting for 60-70 per cent of the portfolio across market cycles. Therefore, around 30-35 per cent of the portfolio is made of small and midcaps.
The consumption theme spans several sectors. These include FMCG, automobiles, telecom services, healthcare, personal products, beverages, leisure & entertainment, consumer durables, home innovation and the like.
ICICI Prudential Bharat Consumption fund favours FMCG and automobiles as its key picks. Though many FMCG names have seen their stocks being in the slow lane over the past few years, selective picks from the automobile space such as Mahindra and Mahindra as well as Maruti Suzuki have worked well for the fund. Pharma is another key segment for the fund, though weightage has been reduced in recent months. Retailing, consumer durables, telecom services and food products have delivered well for the fund and are key holdings.
Weightages to individual stocks is kept less than 5 per cent (barring the top few firms) of the portfolio, thus ensuring diffused holdings.
ICICI Prudential Bharat Consumption remains invested across all periods and takes very minimal cash positions. There is a blend of quality and value in the fund’s sector and stock choices.
Being a thematic fund, it is suitable for investors with a medium to high-risk appetite.
Investors can consider taking exposure to the fund as a part of their satellite portfolio via small lump-sums. Investments via the SIP mode with a time horizon of 7-10 years could also work well for those wanting to buy across market cycles.
Why invest
Tax breaks in the budget to support consumption theme
The fund consistently beats its benchmark on rolling and SIP returns
Large-cap bias brings stability to the portfolio
