Consumption funds have demonstrated significant performance variations despite focusing on the same sector theme. According to Value Research data as of August 19, 2026, there are 37 thematic consumption funds in the market, but only two funds delivered more than 10% SIP returns over the past three years. The top performers were HSBC Consumption Fund with 12.33% returns and Tata India Consumer Fund with 12.20% returns. Conversely, SBI Consumption Opportunities Fund posted the lowest returns at 0.42%, while ABSL Consumption Fund achieved 4.77% returns. As reported by Mint, this performance divergence reflects the varying stock selection strategies and sector allocation approaches among different fund managers.
The performance gap within the consumption sector has been substantial, with Nilesh D Naik, Head of Mutual Funds at PhonePe, explaining that there has been significant divergence in performance among stocks within the consumption sector. According to Value Research data, while the Nifty Consumption Index delivered an average absolute return of 18%, the top third of stocks saw average appreciation of 38%, compared to near-zero growth for the bottom third. This performance differential has been crucial in determining fund returns, with stock selection playing an important role in relative outperformance across different consumption funds.
The portfolio construction of top-performing funds reveals significant differences in investment approach. HSBC Consumption Fund allocates 97.16% of assets to equities with the remaining in cash, while SBI Consumption Opportunities Fund maintains 98.2% equity allocation, 0.1% debt, and 1.7% cash and cash equivalents. According to Mint, HSBC Fund's top five holdings include Eternal, Bharti Airtel, Radico Khaitan, Maruti Suzuki, and Titan, while SBI Fund's top five consist of Mahindra & Mahindra, Asian Paints, Maruti Suzuki, Jubilant FoodWorks, and Berger Paints. Both funds maintain around 50 stocks each with consumer discretionary as the top sector, though their stock selection varies significantly.
The consumption sector has shown clear sectoral outperformance patterns over the past three years. As reported by PhonePe's Nilesh D Naik, the auto sector has been a clear outperformer within the Nifty Consumption Index, while certain FMCG names have lagged during this period. This sectoral divergence has contributed significantly to the performance variations among different consumption funds, with fund managers' ability to identify and capitalize on these trends being crucial for outperformance.
Thematic investing in consumption funds carries higher risks compared to diversified fund options. According to PhonePe's analysis, investing in thematic funds based on past performance can be misleading, as sectors and themes tend to be significantly more cyclical than the broader market. Thematic investing involves significantly higher risk than investing in well-diversified funds, with certain themes and sectors such as infrastructure and technology historically taking nearly a decade to recover after significant market downturns. As reported by Mint, there is no clear trend indicating that passive or active management consistently outperforms in the consumption fund category, highlighting the importance of thorough research and risk assessment for investors.
