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Will mutual funds focused on consumption lag behind during a broad-based market recovery?

Increased preference for premium products with rising incomes remains intact. So, the consumption theme looks good, despite the recent underperformance

March 26, 2021 / 12:31 PM IST

After a great run, consumption-focused thematic mutual funds (MFs) have skidded in recent times. Over last three months, consumption funds gave 7.8 percent returns on an average compared to 13.74 percent returns delivered by multi-cap schemes, as per Value Research data.

These schemes have given good returns in the past. And they are less volatile than many other themes that fund houses invest in. Will consumption funds lag behind during a broader market recovery?

COVID-19 blow and a broader market recovery

Consumption theme usually covers consumer-facing companies. They produce goods and services that you directly use. Cars, white goods, air-conditioners and televisions are discretionary; they are not essential. Daily-use items such as soaps, detergents, eatables and so on are non-discretionary.