What does your typical day look like? You wake up, have a cup of coffee or tea. There’s breakfast to have, lunch to prepare, laundry to do, spend the day at work, with a well-earned sleep at the end.
But that’s just the routine! There’s so much more you do in the day – stepping out to a nice lunch with colleagues, browsing through Amazon or Flipkart and filling up that shopping basket or then going out to the mall and doing the same. Swiggy or Zomato come in handy when you’re too tired to get dinner ready. Your commute is made bearable listening to music or podcasts on your phone or the perfect car sound system. Weekends are spent at the movies, at dinner maybe, or lazing at home with your big-screen TV. Or perhaps driving down in your comfortable SUV to a short weekend getaway once in a while!
This is your story. This is the NEW consumption story. Aside from the routine goods we all consume to live and survive, life has now become more about aspirations and experiences. Call it the YOLO effect or upgrading your lifestyle, you are now revving up the New Consumption story in India.
Our newest smallcase portfolio – Prime Trends – Consumption is built precisely on this consumption theme.
Broadly, the following four factors form the basis for our investment thesis:
- Discretionary spending pick-up: The general thesis is that the average income levels of the population has crossed the threshold that takes care of the basics and incremental income will now go towards discretionary consumption.
- State-wise trends indicate an acceleration in spends across the spectrum: Some of the more developed states, which have crossed well beyond the national per-capita average, have become the bedrock of modern retail and discretionary consumption. Meanwhile, currently poorer states can see consumption picking up as they progress in development thanks to improved infrastructure, shift towards manufacturing and higher labour force participation.
- Growing middle-class to spur aspirational spending: A World Economic Forum study says that the number of middle-income households is likely to increase from 21% of population in 2018 to just over 40% of the population by 2030. Easier access to credit and social media, along with e-commerce, have also become enablers of consumption. All point to a healthy growth rate, far higher than nominal growth rate, for companies that can successfully address the growing consumption needs.
- Scope in individual regions: The large size of our economy and the economic output of each geography offers scalable opportunities for businesses. It isn’t necessary for a country-wide presence for companies to scale up; the sheer size of each region offers ample scope even for regional players.
Current market conditions are also lining up for a well-timed entry. There is, of course, the broader market correction that we’re seeing. Even without this, the shine has been rubbed off the consumption story in recent times. The Covid and post-Covid periods have caused fluctuations in the demand (and input costs) environment and this is reflecting in quarterly earnings numbers, and consequently in stock prices. Several higher-priced consumer plays are now available at attractive valuations, providing a good window of investment opportunity. The long-term consumption story, therefore, looks even better now!
So, if your spending is going to charge the economy and the consumption theme, there is a way to also benefit from it!
