Shah highlighted that their investment focus within the consumption space is primarily on services. The portfolio maintains exposure to sectors like telecom, travel, diagnostics, organised retail, and quick commerce—areas where they hold an overweight position.
In contrast, they have remained underweight in product-centric segments such as FMCG, consumer durables, and, to some extent, the automobile sector.
Shah believes rising per capita income is driving a structural shift in consumer behaviour—from goods to services. He notes that while traditional product consumption may appear flat, there’s a growing, often overlooked trend in the uptake of financial services such as asset management and life insurance.
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Similarly, telecom usage has surged, with people consuming significantly more data than before, even if costs haven’t risen proportionally. Services like travel, diagnostics, and education are becoming a larger part of household spending, especially among higher-income families.
He also points out that even within product consumption, the way people buy is evolving. Growth is being seen in modern retail formats and quick commerce, indicating a shift not in the quantity of goods consumed but in the channels and experiences through which they are accessed.
As a result, consumption growth is increasingly being driven by services rather than traditional goods.
The Reserve Bank of India (RBI) surprised the market with a 50 basis points (bps) cut in the benchmark repo rate and slashed the cash reserve ratio by 100 basis points. Anand Shah believes this move signals a clear push toward growth, increased spending, and higher capital expenditure.
Within the financial sector, his preference remains with large banks, primarily due to their strong liability franchises.
He added that in banking, the cost of funds—essentially the raw material cost—is a critical factor for success. The investment approach continues to focus on banks that have a competitive edge through lower funding costs, which Shah considers essential for long-term performance.
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