Investing in NSE Consumption Index. Thoughts?

#1
Hi,

I was pondering over the idea of investing in the NSE Consumption Index on the next correction. If you check the FactSheet available on the NSE website, this Index has done pretty good since the 2008 crisis. I think Consumption is going to be a major driver of Growth in the Modi era, so thinking of getting in fairly early.

Questions

1) Do we have an ETF for the NSE Consumption Index?

If not then an alternate would be to use the stock list and the Factsheet from the NSE website to closely replicate the Index.

Another Index I am particularly interested in is the NSE Infra Index which at this point provides a good entry from an equity curve trading perspective too.

I request all the senior members and seasoned investors to comment on this post and provide their advice/insights.

Thank you.

:)
 

protrade

Well-Known Member
#2
If you are looking to invest on the basis of "themes", in general it is a good idea, but you need to be very careful which themes you pick, and which stocks you choose in those themes.

In India, domestic demand very much seems like the place to be. However, please be aware that consumption is also a double edged sword - players in FMCG space are facing competition from unlisted companies like Patanjali. And this is going to intensify. The problem for a player like Unilever is that what they need to do to fight a Patanjali could hurt them against the P&G's of the world!

Its anyone's guess how cement will play out in the future. GST will obviously benefit cement, but the end of cartelisation will probably introduce real competition for the first time. Till recently cement was the best proxy for the Infra space, but in the future, I think companies like L&T would be better. The beaten down real estate stocks could be surprise winners with interest rates dropping.

I think it is safer to stick to basic themes in India - for instance, if the Indian economy is going to perform well, then that cannot happen without banks performing well. And today, banks may have popped up from the lows, but they are still nowhere close to where would be once their problems are all solved. Pick the best players amongst the beaten down banks, and buy them. You can't go wrong with ICICI, and SBI. And banking is a theme that benefits from lower interest rate environment anyway.

Same way, pick ground up fundamental stories. I believe Reliance is a stock that's going to go ballistic soon. Reliance Retail will soon see a stake sale similar to what Reliance sold to Chevron in their Oil & Gas exploration business. The entire debt burden of Reliance Industries could be wiped out in a heartbeat if such transactions happen. And you can be sure there is a long line of suitors for Reliance, on Reliance Retail, its just a question of whom they say yes to!

Reliance Jio is already kicking off big - and this is going to be a massive story over the next 5 years. Not many people understand the nuts and bolts behind Jio's strategy. In 2010, Reliance won 2.3 GHz BWA spectrum. This is the worst possible spectrum that anyone can use for voice and data. Because it simply cannot penetrate indoors, basements, and is easily blocked even outdoors. To overcome this limitation, Reliance Jio had to lay an extensive fiber optic cable backbone, which gives them an endpoint within 1km of 90% of Indian population! And within 0.5km of 75% of Indian population. Today Jio has launched LTE services, but that's not the story. Over the next year or so, Jio will start hooking up people directly to their fiber backbone, and will extend that fiber even more. When that happens, the story changes completely! To pull off something like this in a country the size of India, is not a joke!

I like Tata Motors for the short to medium term, maybe a 1 year play, but in the long term, all automobile stocks, around the world, are dead! The future will not be about individual car ownership, it will be about driverless cars that can be availed off on pay-and-use model. And will largely be electric in nature. And because of that, we will see dramatic changes in the car industry. Pretty much EVERY SINGLE PLAYER in the auto business today is facing death - including Tesla.
 
#3
Hi ProTrade,

Thanks for your insights.

The indices that I mentioned (Consumption and Infrastructure) are spread across sectors. The names are a little misleading.

For Example, the current composition of the Consumption Index is as follows:

Apollo Hospitals Enterprises Ltd.
Asian Paints Ltd.
Aurobindo Pharma Ltd.
Bajaj Auto Ltd.
Bharti Airtel Ltd.
Britannia Industries Ltd.
Colgate Palmolive (India) Ltd.
Dabur India Ltd.
GlaxoSmithkline Consumer Healthcare Ltd.
Glaxosmithkline Pharmaceuticals Ltd.
Godrej Consumer Products Ltd.
Havells India Ltd.
Hero MotoCorp Ltd.
Hindustan Unilever Ltd.
I T C Ltd.
Idea Cellular Ltd.
Indian Hotels Co. Ltd.
Jubilant Foodworks Ltd.
Mahindra & Mahindra Ltd.
Marico Ltd.
Maruti Suzuki India Ltd.
Page Industries Ltd.
Reliance Communications Ltd.
Reliance Infrastructure Ltd.
Sun TV Network Ltd.
Tata Power Co. Ltd.
Titan Company Ltd.
United Breweries Ltd.
United Spirits Ltd.
Zee Entertainment Enterprises Ltd.

If you see this gives a good diversification across sectors.

You are correct that basic sectors like Financial Services would do well. I would even add healthcare to it.

Thanks again, and happy investing !
 

protrade

Well-Known Member
#4
Hi ProTrade,

Thanks for your insights.

The indices that I mentioned (Consumption and Infrastructure) are spread across sectors. The names are a little misleading.

For Example, the current composition of the Consumption Index is as follows:

Apollo Hospitals Enterprises Ltd.
Asian Paints Ltd.
Aurobindo Pharma Ltd.
Bajaj Auto Ltd.
Bharti Airtel Ltd.
Britannia Industries Ltd.
Colgate Palmolive (India) Ltd.
Dabur India Ltd.
GlaxoSmithkline Consumer Healthcare Ltd.
Glaxosmithkline Pharmaceuticals Ltd.
Godrej Consumer Products Ltd.
Havells India Ltd.
Hero MotoCorp Ltd.
Hindustan Unilever Ltd.
I T C Ltd.
Idea Cellular Ltd.
Indian Hotels Co. Ltd.
Jubilant Foodworks Ltd.
Mahindra & Mahindra Ltd.
Marico Ltd.
Maruti Suzuki India Ltd.
Page Industries Ltd.
Reliance Communications Ltd.
Reliance Infrastructure Ltd.
Sun TV Network Ltd.
Tata Power Co. Ltd.
Titan Company Ltd.
United Breweries Ltd.
United Spirits Ltd.
Zee Entertainment Enterprises Ltd.

If you see this gives a good diversification across sectors.

You are correct that basic sectors like Financial Services would do well. I would even add healthcare to it.

Thanks again, and happy investing !
I would not invest in this list at all :) Far too many names that are having some issue or the other. And some names have run up so high, they are massively dicey.

If you want Pharma, I would suggest Sun Pharma or Lupin. Reasonable valuations, and good story, with specific upside triggers.

I wouldnt touch any of the Telecom pack there, neither the FMCG pack, nor the Automobile pack there. And if you remove the massively overvalued companies like Asian Paints etc.
 
#5
Hi Protrade,

I wouldn't invest in a lot of them either. But this index as whole has done pretty well in the last 7/8 years.
Obviously, the index would get rebalanced/reconstituted later this year and that would probably be a good entry point.
It just saves a whole lot of analysis and research and you don't have any emotions involved either :)

Thanks for your advice :)
 

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