Robeco favours consumption as top India bet

Robeco favours consumption as top India bet
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First Published: Tue, Jul 21 2009. 06 53 PM IST
Updated: Tue, Jul 21 2009. 06 53 PM IST
Mumbai: Robeco’s Indian mutual fund unit favours domestic consumption over infrastructure given rising income levels and changing lifestyle of India’s vast and expanding middle class, a top fund manager said on Tuesday.
Anand Shah, who manages Rs7 billion as head of equity for Canara Robeco Asset Management, said infrastructure firms might not sustain their stellar growth of the last five years.
Instead, he expects the consumption theme to outperform in the next 5-10 years as India’s $1 trillion economy doubles by 2014, also doubling the per capita annual income to more than $1,600.
“From a longer-term perspective, consumption is a much more sustainable story than infra,” said Shah.
The fund manager is overweight on sectors such as telecom, banks, retail and media and had invested nearly 18% of his Canara Robeco Equity Diversified fund in shares of financial firms at June-end, according to data from ICRA Online.
Bharti Airtel, State Bank of India, Idea Cellular and HDFC Bank are part of top-five holdings of the fund that has returned nearly 57% in 2009, almost matching the rise in India’s benchmark index.
Shah, who also holds shares in Pantaloon Retail, said the Indian middle class, number of mobile phone users as well as savings account holders is larger than the entire population of the US, the world third most populous nation after China and India, with scope for rapid growth.
As the economy booms, more Indian households are adding a second earning member, raising their purchasing power and freeing up money for discretionary spends.
On the other hand, he said infrastructure firms have seen rapid growth in the last five years and “might see growth for another two years but beyond that it will be tough for them to sustain growth.”
“Yes, both have growth today. But when you look two years down the line, consumption is a much safer story than infra,” Shah told Reuters at a press briefing to announce the launch of a fund that would bet on the consumption theme.
The fund manager said he was also cautious on businesses exposed to the global economy such as commodities and information technology.
“If anything that is safe, anything that is resilient today, that is private consumption in India,” the Mumbai-based executive said.
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First Published: Tue, Jul 21 2009. 06 53 PM IST
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