Motilal Oswal's outperforming fund adds shares of jewellery, electronics makers

Motilal Oswal Asset Management Co. is expecting India's insatiable appetite for discretionary goods and the government’s push to expand manufacturing to spur the next leg of a rally in related shares.

Chief Investment Officer Niket Shah said he’s adding shares of companies that offer lower priced non-essential goods, such as jewellery and apparel, on expectations of increased spending. He’s also scouting for opportunities in India’s growing electronic component sector. The asset manager’s Motilal Oswal Midcap Fund has returned about 63% in the last 12 months against a 33% gain in its benchmark, making it the top mutual fund in the nation.

As food inflation remains high, the government will try to put more money in the hands of the people, said Shah, who oversees more than $7 billion. “I’m expecting meaningful changes to the income tax code that will benefit consumers at large,” he said.

While rising prices have hurt demand for fast-moving consumer goods companies, people aren’t willing to dial down on some discretionary spending, said Shah. People earning lower incomes are “aspiring to get high-end phones,” even if that means sacrificing on basic expenses, he said.