A $22 billion fund manager expects this sector to bounce back by end of the year

Vineet Sambre, Head of Equities at DSP Mutual Fund, which manages funds worth $22.34 billion, remains optimistic about a key sector: consumption. “The hope is that consumption should start seeing revival, maybe towards the end of this year,” he says, signaling a potential bounce back.

Sambre acknowledges the consumption uncertainty, noting the “shifting wallet shares and changing spending patterns.” He suggests investors build a “basket of consumer discretionary stocks” to navigate this dynamic environment, banking on tax benefits and welfare schemes to drive demand.

However, he also emphasises the competitive dynamics in consumption, particularly in sectors like quick commerce, where “competition is hitting up,” and profitability remains elusive.

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The broader market faces increased competitive intensity across sectors, a significant challenge for existing companies. This, coupled with technological disruption, has created a challenging investment climate, demanding constant vigilance and reassessment of financial models. “We have to be very alert in terms of how the companies are keeping up with their competitive moats,” Sambre warns.

A competitive moat is a sustainable competitive advantage that protects a company’s market share and profitability from rivals

The impact of new entrants is evident, as seen in the wires and cables sector, where stock prices reacted swiftly. Sambre points out that “the stock reaction has already happened, because the playbook was available, investors got worried very soon.”

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While valuation and growth remain considerations, with potential opportunities arising from market corrections, earnings and valuations in mid-caps are still largely driven by sentiment, with a risk of further downgrades.

DSP Mutual Fund’s investment strategy during market declines involved adding to existing positions and selectively reducing exposure to companies with prolonged recovery periods. New investments focused on sectors experiencing cyclical lows, like specialty chemicals and auto ancillaries.

For the full interview, watch the accompanying video

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