Nifty India Consumption Index: Investing smartly in the spending basket
India's consumption theme remains structurally strong, supported by demographics, rising incomes, urbanisation, and digitisation. Chintan Haria of ICICI Prudential AMC suggests investors can capture this long-term growth through the Nifty India Consumption Index, which offers diversified exposure across sectors and has consistently delivered competitive returns over time.
IANS Despite concerns over a potential demand slowdown, India's private final consumption expenditure (PFCE) grew by 7.2% in FY 2024-25. The past 12-15 months have seen the markets turn quite volatile due to a variety of local and global macroeconomic factors, slowing corporate earnings, geopolitical tensions and FPI selling. Though there has been a recovery in key indices since April this year, choppy markets have returned as US trade tariffs (25% earlier and another 25% added recently) meant that many export-oriented sectors could feel the heat in the coming quarters unless an India-US deal is struck soon.At the other end of the spectrum, despite fears of a demand slowdown, India's private final consumption expenditure (PFCE) rose 7.2% in FY 2024-25. And consumption still accounts for 61.4% of India's GDP.
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With income tax cuts announced in the Budget starting to take effect this fiscal and also the pay commission for government employees set to make recommendations for increases in 2026, consumption is likely to get a boost. The RBI's 100 basis points rate cut is also set to give a thrust to credit offtake.Given that many segments in the consumption basket have corrected since September 2024 and are yet to recover significantly, there is some value comfort emerging in those sectors. Structurally, favourable demographics, improving per capita income, continuing urbanisation, premiumisation in purchases, formalisation in the economy and digitisation provide a long runway for the theme's growth. For investors, taking a passive approach through the Nifty India Consumption Index could be an effective way to gain exposure.
India has one of the youngest populations in the world, with a median age of just 29 years compared to around 39 years for the US and China, favouring a larger potential workforce.Given India's steady economic growth (6-7%), the country's per capita income could double to around $5000 in the next 5-7 years, unleashing increasing consumption spending.A recent report from Deloitte says that by 2030, India may add around 75 million middle-income and 25 million rich and affluent households, making it one of the fastest-growing consumer markets globally.According to Invest India, digital shopping by mass consumers is likely to add ~45% to the gross merchandise value of e-commerce by 2030. Indian retail is aiming for a $2 trillion valuation by 2033. Electric vehicles are expected to account for about 40% of the Indian automotive market by 2030, generating $100 billion in revenue.India is also on track to achieve 1 billion internet users by 2025. Monthly data usage has increased from just 61.7 MB in 2014 to 18.4 GB in 2024.Luxury retail in India is expected to grow to $85-90 billion by 2030, according to Bain & Company.Overall, these data points suggest a structural story on India's consumption that could play out over the next 10-15 years.
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As such, the consumption basket comprises several sectors and sub-segments spanning different industries. FMCG, automobiles, realty, healthcare, consumer services, retail, telecommunications, consumer durables, e-commerce, media & entertainment and power are some of the sectors that are part of the domestic consumption play.Each of these sectors has its own dynamics and business cycles. For retail investors, it may be difficult to pick specific segments and may therefore be better off taking the index route.
The Nifty India Consumption Index contains a diverse range of stocks from the sectors mentioned earlier. The benchmark has 30 stocks across nine sectors. The weightage to individual stocks is restricted to 10%. This index is rebalanced semi-annually. On a point-to-point basis, the Nifty India Consumption index has delivered above-average returns over the past three, five and 10-year periods. The index has even outperformed broader indices mildly over the 10-year timeframe.On rolling returns, too, the Nifty India Consumption Index scores well. On a 5-year rolling returns basis from August 2010 to August 2025, the consumption index has delivered higher mean (14.7%) and median (15.02%) returns compared to broader indices.
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Investors seeking to participate in India's consumption growth story without the complexity of stock picking can consider taking exposure to the Nifty India Consumption Index through the ETF route. This enables passive investing in a diversified basket of companies across multiple consumption-driven sectors, offering broad-based exposure while adhering to the index's systematic weighting and rebalancing methodology. The ETF route also provides benefits such as lower costs and the convenience of liquidity, allowing investors to buy or sell units on the exchange like any other stock.
(Author of the article is Chintan Haria, Principal - Investment Strategy at ICICI Prudential AMC )
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
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