The Hindu Business Line : Birla Mutual plans GenNext Fund

BIRLA Mutual Fund has been bitten by the Generation Next bug. It has worked out an equity product for investing in companies that are likely to benefit from rising consumption patterns. Not inappropriately, the scheme has been named Birla India GenNext Fund.

The fund has been mooted on the premise that a critical part of India's consumption is now being driven by high disposable incomes recorded by young citizens.

Under normal circumstances, about 90 per cent of the assets will be invested in equity and equity-related instruments carrying medium to high risk profiles.

While the minimum investment is 80 per cent, this can be scaled up to 100 per cent if the situation so warrants.

The country's economy has seen "a paradigm change" in consumption habits in the past decade, the offer document filed with SEBI has mentioned.

The pattern is fuelled by two factors — the opening up of the economy and its integration with global markets.

Some of the sectors that are expected to benefit from this growing propensity to spend are automobiles, hospitality, travel and tourism, retail chains and consumer durables. Financial services too have not been left out of its list of areas in which the fund would try to invest.

The fund, to be managed by Mr Nishid Shah, will have the Nifty as its benchmark index.

Betting on consumption trends

THE MF has referred to the rising income levels in India, which are primarily guiding the new consumption patterns. It has also mentioned the following:

India's per capita income has jumped by 78 per cent at Rs 25,723 per year in 2003-04 from a level of Rs 14,463 per year in 1996-97. If the per capita income of urban areas is considered alone, the number would be higher.

Even though India largely has a developing status, the proportion of services in the overall GDP of the country has grown to almost 50 per cent. This has recorded a growth of eight to nine per cent in the last few years.

With 56 per cent of the population being less than 25 years, it can be safely assumed that the companies that cater to this segment would stand to benefit in the times ahead.

"The rising levels of consumption are also being led by a growing breed of young educated mass of people working in areas like call centres, service desks, IT companies, financial services etc. The young generation has consumption habits that are markedly different from the existing middle class population," the offer document has pointed out.

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