Tuesday, November 5, 2024

Consumption sectors outperform broader market in the long-term: Bajaj Finserv AMC

India’s per capita income is projected to exceed $3,000 by 2025 1 , fuelling consumption growth. By 2030, the middle class is expected to comprise 40% of the population, significantly driving discretionary spending.

A new study by Bajaj Finserv AMC has shown that the Nifty India Consumption Index outperformed the broader market over several cycles, generating 5.3%(absolute) alpha over the past one year, 2.8%(compounded annualised) alpha over the past three years, and 0.4%(compounded annualised) alpha over the past ten years, as of August 2024 2 . This data suggests that consumption-related sectors are on the rise in the country and are poised for a potential boom in the long term.
The Index delivered returns of 45.5% for one year, 20.5% for three years, and 14.5%
for ten years as of August 2024. In comparison, the Nifty 500 Index provided returns of 40.2%, 17.7%, and 14.1% for the same one-year, three-year, and ten-year periods, respectively 3 . Additionally, the study indicated that the Nifty India Consumption TRI outperformed the BSE 500 TRI seven times in the last 11 calendar years 4 .

#Performance less than 1 year is absolute and more than 1 year is compounded annualized.

Moreover, the Nifty India Consumption Index showed greater resilience compared to the broader market, with less drawdown during the Global Financial Crisis and the COVID-19 pandemic. During the Global Financial Crisis in 2009, the Nifty 500 Index dropped by 64.26%, while the Nifty India Consumption Index experienced a drawdown of 53.11%. Similarly, during the COVID wave of 2020, the Nifty 500 Index fell by 38.30%, while the Nifty India Consumption Index fell by 32.37% 5 .

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