Motilal Oswal Asset Management Co. is optimistic about the future of India’s discretionary consumer goods market and the government’s initiatives to improve the manufacturing sector, which he believes will lead to a rise in related stocks. Investment director, Niket Shah, focuses on stocks of companies that offer low-cost non-essential items, such as jewellery and clothing, anticipating a rise in consumer spending. In addition, it explores opportunities within the growing Indian electronic components sector. The Motilal Oswal Midcap fund has performed exceptionally well, with a return of around 63% over the past year, significantly outperforming the 33% gain of its benchmark index, making it the leading mutual fund in India.

Shah attributes this performance to strategic investments and timely exits from sectors with inflection points. For example, it invested in telecom companies like Bharti Airtel and Indus Towers before the tariff hikes were implemented, which contributed to the fund’s success. He noted that even as rising food inflation hits demand for fast-moving consumer goods, consumers still tend to spend on discretionary items, including high-end electronics.

Shah expects the government to implement significant changes in the income tax code aimed at increasing the disposable income of consumers. He also highlighted the potential benefits of production-linked incentives for the electronics sector, as India looks to play a more important role in global supply chains. In addition, he indicated a change in government policy that could allow Chinese companies to set up joint ventures in India, which could improve the scalability of manufacturing with Chinese technology.