Everyone was waiting for this consumption fund, I can tell you. I think the wait is over as the consumption fund finally comes out of Edelweiss. Do you agree with me?
Radhika Gupta: correct. And when we launched the fund, I don’t think our CIO was telling me that consumption would be the dark horse of the year. After the announcement on Saturday, we all took office. He came out of the cabin and he said, I don’t think it’s going to be a dark horse, it’s a horse this year.
I thought I planned it after the budget and launched it. What timing?
Radhika Gupta: I planned it before my budget. It opened the day before my budget. The NFO opened the day before the budget and then Budget Day was what we said, well, what a great timing.
Next time you need to know what’s coming within your budget, I should call you.
Radhika Gupta: correct. Incidentally, we did this right last year too. We went down in the dump in March and did Tech when technology was in the 2024 sector. So you need to call us.
Consumer stocks are considered expensive, so why should you invest in them? There may be this wonderful Indian romance. However, if you are buying multiple companies with 50, 60, 70 PE, you won’t make any money because this is a consumer stock.
Radhika Gupta: So I’ll give you a simple 2 liner about it. For one, I think consumption will be the majority of that story if the Indian story has to unfold. He says that when the per capita income ranges from 250 and a half to 5,000 people, ultimately Viksit Bharat, 15,000 to 20,000, 60% comes from consumer spending. Looking at the trajectory of major economies, we can see how the United States was shaped in the 60s, 80s and 2020. Consumption followed that pattern. So it is a broad sector and India is a consumption-driven economy.
Now points, expensive consumption stock. If we look at India in total, the stock market is higher than the 10-year average, so India’s PE has been multiple over a decade. Therefore, India is being revalued upwards.
However, within that basket, consumption inventory has declined by 20%, 30% and 40%. And in an environment like 2025 where you see a revenue disappointment, most of the pain in consumption is in the price.
We’re not saying we’ll turn the quarter around. In fact, we say you may have a bad income of one or two more quarters, but you are approaching the bottom of your consumption revenue cycle.
And thirdly, it has all the forms of catalysts that weren’t planned when the fund was launched, but came within budget.
Consumption can start with FMCG and be as high as luxury cars. What is the fundamental theme of this fund?
Radhika Gupta: There is a myth that consumption is a staple food with these very boring FMCG companies. And we would like to argue that consumption is actually very dynamic. So, looking at American consumption baskets, the number one item is actually media, and the third item is biotech. So, as people’s income changes, can you imagine what we spend on change is that Kumbh tickets will be 80,000 per night? So I think it’s core consumption. Split it like this.
There is a core consumption, such as your traditional staples. It will become part of your portfolio. However, there are two other categories as well. Category 2 is what you call emerging consumption.
So, for example, food delivery is a new form of consumption, beauty and personal care is a new form of consumption, travel is a new form of consumption, and it is an empirical one, and in this category more list companies are I think it will appear.
So, over the last few years there have been many listed companies, platforms, D2C brands and more. And thirdly, there are periodic consumption. Therefore, consumption is not static. For example, there is the economic point where demand for motorcycles is very successful. You have a point in an economy where hotel demand is really good. Therefore, the core appears, is periodic, and tries to blend all three.
Last year you had this big theme about manufacturing. There, many people actually went ahead and invested in the subject. And when they got into this it was actually a high-risk sector. There was a high chance of growth. But now, if someone is looking at the consumption space and looking at the consumption space considering how the budget has been panned, what should they be very careful about?
Radhika Gupta: So, this is how I think about it, and putting this consumption aside, we manage normal funds on a large scale with the choice to move between sectors. Do that at the bottom of the cycle.
So, past performances look very good and usually come up at the top of the cycle, as they were in the case of manufacturing and defense last year. The theme should be done at the bottom of the cycle.
Now, with our own funds, we were open about the very overweight manufacturing industry last year. Last year we reduced the weight of manufacturing and capital-oriented sectors and added three sectors, technology, banks, lenders and consumption well before our budget.
So, when you look at the theme, you need to see what is at the bottom of the cycle. If there is a revenue downgrade, you need to look at the safety margin.
So we’ve got your perspective on the Consumption Fund you just launched. But other than that, it also helps you understand SIP. Being with us, the market is a bit behind, so I wanted to get the sense that what we’re looking at is an increasing volatility. Where do you think SIP trends are moving forward? It has grown in one direction, but there has been a bit of a slowdown in terms of incremental growth. Have you seen any changes you’ve seen recently in the shifts that were there in terms of SIP inflows and rather allocation?
Radhika Gupta: It’s too early to tell. So, looking at the tide, it began to change in October from a market perspective and a narrative perspective. Looking at the monthly equity flows to industry, they are roughly the same. In fact, I think there is probably a trend in the industry with stocks that are over 40,000 crores.
Certainly, our numbers were the same as in November, October January. See, it has two parts. The SIP long term remains structural. In other words, when we come to the end of the decade, India claims to have a SIP book worth 1 rupees. So, can you see 5% to 10% foam in this number? yes. Are you still looking at the bubble or are you watching it come off? It’s a little too early to tell. One interesting thing is that the return for the year is flatter with SIP. Investors are mature.
They are becoming much longer. But like I said, it’s too early to say it. One thing you’re seeing is that the big NFOs that used to occur may be a bit smaller.
There is this whole story in the market where smallcap is a Humpty Dumpty, and the Large Cup is slim and trim and thin. Shift from Smallcap and go to Largecap. At the portfolio and AMC levels, do you see this coming? The net numbers are impressive, but are they at the expense of SmallCap, Small -Cap Funds, Midcap, Midcap funds?
Radhika Gupta: No, I don’t like stories. I don’t understand the story and I think there’s a reason for some people to spread the story. But here are some things I say. One, if you look even during this revenue season, what is disappointing with revenue is actually massive and small, medium cap revenue growth, and that indicator trades at top speed until revision That means that.
MIDCAP revenue growth has actually been better. Therefore, these small and midcaps should be traded at a discount to Largecap and others. I don’t know if I’ll buy it or not.
Another thing I always say is that in India there is a very unique way to classify mid-small caps. Your small cap is now 11,000 trillion companies. Due to the rank-based definition, midcap has become a 30,000-40,000 crore company.
And I always say that investors don’t jump this from small cap hat to a large cup hat, and won’t end up with more flexi caps and multi caps. Get 50-100 companies.
I don’t think I’ve seen a small and medium number cut. We operate large mid-cap funds and large small-cap funds. In fact, in January, we saw an accelerated number of people entering Midcap. So we don’t think we’ve seen that cut yet.
If someone has been reviewed for 3 years and they suddenly feel it, if I’m talking about Gen Z’s, Post Covid Investors, 30%, 20% mutual funds, they’re what we should do mosquito? Papa ne Bola Equity Mein Paisa Mat Dalo, Humne Nahi Suna.
Radhika Gupta: Incidentally, Mujhe lagta hai gen z Investors Ghabrate Nahi Hai. For them, even doing SmallCap mutual funds is not offensive. But I have met more and more Gen Z investors. So I don’t think mutual funds are very aggressive to them. But my learning to be a new investor is, looking at, revisions are a characteristic of stock investments. That’s not a fair bug.
So ride it and just use it this time to look back at what your actual risk appetite is. No one has learned risk appetite in high class so you learn your risk appetite in the down market.
So, don’t do anything. Don’t panic when you see the red, use this time to reflect. And I think Gen Z has a lot of risk appetite.
We underestimate the risk appetite of this generation. Indian people born after 2000 are born in India, an Indian startup India, and have many risk appetites.
What else is the post-selling theme of the market that the fund manager thinks there is an additional alpha, as Alpha says, I always like that word, it is the Greek alpha, and alpha is someone’s It can be generated in a portfolio.
Radhika Gupta: So in finance, the wind is changing. And I come from the capital markets, but for the past few years, lenders, especially banks, have been weak, and many streams have gone to capital market oriented companies, exchanges, brokers, etc.
I think banks, private sector banks and lenders will become underdogs when we see market changes. So we’re adding that to the fund. So now they are considered a valuable game. The fact is that the quality of the balance sheet continues to be very good and you have a red cut that could come your way. Therefore, lenders are the next big thing.
