Introduction
The Consumer and Retail Sector – Have you ever wondered which sector has generated the highest wealth for its investors in the last 25 years? The answer might surprise you. It’s not the technology sector or the hot themes of today. According to the M 25th Wealth Creation Report, the This sector takes the top spot with a 28% contribution to the top 100 wealth creators. In this blog, we will explore why This sector is the biggest wealth creator in India and discuss an index fund category that invests in these companies.
The Market Size and Income Growth
This sector has thrived due to India’s massive population and the growth in income levels. With a population of over 140 crore people, India provides a huge consumption market for companies in this sector. Over the past 20 years, the per capita income in India has risen from $443 to around $2,100, a five-fold increase. It is projected to reach $10,000 in the next 20-25 years. This rise in income has fueled consumer spending and the demand for premium products.
Shift from Unorganized to Organized Segment
Another key factor contributing to the success of This sector is the shift from unorganized to organized retail. Small mom-and-pop stores are being replaced by large malls and top companies are gaining significant market share. This transformation has been driven by the increasing preference for premium products and a shift in the consumer mindset towards spending money on quality experiences.
The Potential of Nifty Non-Cyclical Consumer Index
What sets the Nifty Non-Cyclical Consumer Index apart is its potential to generate great returns while also having lower volatility compared to the overall market. It has consistently outperformed the Nifty 50 index in terms of returns over different time durations, including 1 year, 3 years, 5 years, 10 years, and 15 years. The risk-adjusted returns of the index are also better.
During market downturns, the Nifty Non-Cyclical Consumer Index has shown more stability compared to other indices. For example, during the housing bubble burst period in 2008, while the Nifty 50 index tanked by 24.49%, the Nifty Non-Cyclical Consumer Index was down by only 23.92%. Similarly, during the September to December 2008 period, while the Nifty 50 index declined by 51.13%, the Nifty Non-Cyclical Consumer Index was down by 36.46%.
Currently, the Nifty Non-Cyclical Consumer Index is trading at a PE ratio of 59.3, which is better than its historical 5-year and 10-year average PE ratios. All these factors indicate that the Nifty Non-Cyclical Consumer Index is an attractive investment option to capitalize on the consumption theme in India.
Premiumization Trend
India is witnessing a trend of premiumization across various sectors such as auto, electronics, fashion, and travel. This sector are willing to pay a premium for high-quality products and services. For example, iPhone sales in India have been soaring, with a 42% growth rate projected for 2023. This shift towards premium products is driven by the desire for a better lifestyle and the growing convenience provided by credit cards and EMI options.
Increasing Working Population and Rural Market
India has one of the youngest populations in the world, with 65% of people below the age of 35 and 50% below the age of 25. Every year, millions of people join the workforce, increasing their purchasing power. The growth of the internet, smartphones, and e-commerce has further fueled the consumer and retail market in India. Despite being one of the fastest-growing economies, around 65% of the population still lives in rural areas. As more people migrate to cities for better opportunities, the consumer market in rural areas remains untapped.
Middle Class Driving Consumption
Research suggests that by 2030, India will shift from being an economy led by the bottom of the pyramid to one led by the middle class. Nearly 80% of households in 2030 will be in the middle-income bracket, compared to 50% today. This middle-income group will drive 75% of consumer spending. These projections highlight the long-term growth potential of This sector in India.
Nifty Non-Cyclical Consumer Index
If you want to invest in the This sector, one way to do so is through the Nifty Non-Cyclical Consumer Index. This index tracks the performance of stocks that represent the non-cyclical consumer theme in industries such as consumer goods, consumer services, telecom services, media, entertainment, publication, and textiles.
Index Composition
The Nifty Non-Cyclical Index consists of the top 30 stocks from eligible industries, chosen based on their six-month average free float market capitalization. The index has a maximum cap of 10% for a single stock. The top sectors in the index are FMCG with a 43.14% weightage, followed by consumer services, durables, telecommunication services, and textiles. The index includes well-known companies such as HUL, ITC, Titan, Asian Paints, Zomato, Nestle, Trent, Tata Consumer, Avenue Super Mart, and many others.
Historical Performance
The Nifty Non-Cyclical Consumer Index has consistently outperformed the Nifty 50, Nifty 500, and Nifty Total Market Index in terms of returns. It has also shown lower volatility, making it a less risky investment option. During market downturns, the index has demonstrated more stability compared to the overall market.
Investment Opportunity
Considering the growth potential of the Indian economy and This sector, investing in the Nifty Non-Cyclical Consumer Index can be a great opportunity. The index has generated impressive returns and provides a relatively lower risk investment option. With India’s rising per capita GDP and the increasing demand for quality products and services, the consumption theme is set to create wealth for investors in the long run.
Conclusion
This sector has emerged as the biggest wealth creator in India, driven by factors such as the large market size, growth in income levels, and the shift towards premium products. The Nifty Non-Cyclical Index offers investors an opportunity to capitalize on the growth of this sector. With its stable returns and lower volatility, the index presents a promising investment option for those looking to benefit from India’s consumption story. As India continues on its path to becoming the third-largest economy in the world, consumption will play a crucial role in driving its growth journey.
Disclaimer: The information is only for information purpose only. It is always recommended to consult with certified financial experts before making any investment decisions. Follow busymoneyfreak.com .