'Turning constructive on consumption recovery'

Summary: India’s consumption engine has been sputtering, but signs of a turn are emerging. Earnings have been soft and valuations elevated, yet easing inflation, GST cuts and policy support are beginning to revive demand in mass-market categories. Against this backdrop, Siddhant Chhabria, Research Analyst and Fund Manager at Mirae Asset, sees the early stages of a broader recovery. Managing the Rs 4,769-crore Mirae Asset Great Consumer Fund, he discusses the shifting opportunity set across discretionary and staples, his large-cap tilt, how he evaluates new-age businesses and the drivers behind his fund’s recent performance. India’s consumption sector has been through a choppy phase, marked by an earnings slowdown, muted urban demand and premium valuations that have kept investors cautious. Yet Siddhant Chhabria, Research Analyst and Fund Manager at Mirae Asset Investment Managers (India) believes the cycle is beginning to turn. With monetary and fiscal stimulus kicking in, inflation easing and GST cuts supporting stressed categories, he expects a broader recovery to take shape, especially in beaten-down pockets of mass consumption. Currently, Chhabria manages the Mirae Asset Great Consumer Fund, a thematic strategy with an asset base of Rs 4,769 crore. In this interview, he shares his take on the recent market correction, why his fund leans heavily towards large caps, his optimism on new-age companies and the reasons for the strong performance of his consumption fund. Within the consumption universe – autos, durables, apparel, QSRs, home improvement, digital-first businesses – how do you break down the opportunity set today? Which sub-themes offer the most attractive risk–reward at this point? The way we are thinking about the theme is that we are more overweight in consumer discretionary and underweight in staples, because we believe that discretionary can grow 1.5-2x gross domestic product (GDP). In contrast, staples have the potential, at best, to grow at 1x GDP. And from a valuation standpoint, both sectors are broadly in a similar range. Hence, given the better growth profile of discretionary, we prefer it over staples. Within discretionary, we’ve been more positive on new-age or platform companies and believe this is a long-term opportunity that’s very attractive if one identifies market leaders in this space. These companies have also demonstrated a path to profitability. However, in the near term, some of these companies’ valuations have caught up, and we’ve reduced their weight in recent periods. Similarly, in discretionary, we’ve been constructive on autos, especially four-wheelers. We were looking for a mean reversion in entry-level four-wheelers, which also started to play out after the GST.