Markets

A $13 billion fund makes contrarian bet on India consumer stocks

By Nupur Acharya and John Xavier

Flagging Indian sales of products like toothpaste and hair oil have been a drag on the share prices of the nations consumer goods makers, but each dip is a buying opportunity for a fund manager who sees the slowdown in demand as temporary.

“The stocks offer stability and steady growth,” said Mahesh Patil, co-chief investment officer at Aditya Birla Sunlife Mutual Fund, which oversees assets of about $13 billion. “We dont expect valuations to correct too much for consumer companies. They may consolidate a bit, but in a correction, we would look at them.”

Companies such as ITC Ltd., Hindustan Unilever Ltd. and Marico Ltd., which sell everything from grains to beverages to detergents, have lost their shine on the stock market as a cash squeeze caused by the crisis in some finance firms hurt demand even for staples. Data late Friday showing the nations gross domestic product rose at the slowest pace in several quarters only ratified the markets assessment of consumer businesses.

Patil said his bets on the sector are pinned on Prime Minister Narendra Modi-governments plan to buoy farmers spending by investing 25 trillion rupees ($359 billion) in rural development and giving annual household handouts of 6,000 rupees. He expects a resumption in spending on higher-value items, like washing machines and refrigerators, that was put on hold during the six-week-long election that concluded two weeks ago.

“Staples and low ticket consumer discretionaries like consumer durable will do better,” he said. “We remain positive on the consumer story and think it will be Indias mainstay for growth for the next many years.”

While he wouldnt name the stocks the firm has been buying, Aditya Birla Sun Life Frontline Equity and Aditya Birla Sun Life Equity Hybrid 95 added to holdings of cigarette to packaged food maker ITC, data as of April 30 Read More – Source
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