What Are the Three New Pillars of Indian Consumption?

Private consumption accounts for ~60% of GDP, but its underlying drivers have rewired around three pillars:

• ​​​​The “New Elite” Owner-Operators: Top-end wealth is expanding rapidly, led by ~350,000 “octopus” families whose wealth grew 16-fold over 20 years. 54% of current Nifty 50 directors hold non-IIT/IIM domestic degrees. Real estate reflects this shift: homes priced above ₹1.5 crore now comprise 53% of new launches (up from 15% in Q1 2022). 
• A Credit-Funded Middle Class: Lacking real wage growth, middle-class spending is increasingly financed by debt. Non-housing household debt is among the world’s highest as a share of GDP, with ~40% of income spent on debt servicing. While vehicle credit (+18.8%) and gold loans (+88.1%) grow rapidly, unsecured credit for durables (+0.4%) and credit cards (+2.3%) has flatlined.
• State Pivot to Cash Transfers & Private Services: Constrained by interest costs (38% of Centre’s revenue receipts), the state is stepping back from public service delivery, pivoting instead to direct cash transfers (₹1.7 lakh crore across 13 states in FY26). Households must now pay out-of-pocket for essential services like education (40% K-12 private share) and healthcare (52% private spend, 39.4% direct out-of-pocket).

Since 1991, Indian market cycles have typically seen short, easy expansion phases followed by tougher compounding periods. In this environment, relying on mass FMCG growth is no longer sufficient.To build resilient long-term capital, Marcellus has rewired its portfolios across three distinct vectors: 

What worked and what didn’t?

Slight overweight positioning in domestic equities and allocation to gold drove the relative underperformance during the month partially offset by cash allocation through arbitrage funds in the portfolio.

Portfolio remains positioned to weather uncertainty and benefit from possible earnings upgrades, with defensive allocation to large caps balanced by meaningful allocation in good quality small and midcap companies.

What worked and what didn’t?

Relative to the benchmark, the strategy’s higher allocation to small cap and healthcare sector and underweight in financials and IT sectors helped. Though allocation to large and midcap stocks was a drag.

Despite the recent rally during the financial year, valuations across several holdings remain attractive. Our portfolio delivered 25% earnings growth during the quarter ended June, 2026 but still trades at 18x P/E—near the lower end of its historical valuation range. Key risks to this view include a sharp slowdown in domestic economic activity or a rise in global interest rates.

What worked and what didn’t?

Over the last 12 months, top detractors in KCP were CMS Info Systems and HDFC Bank. The top contributors to the portfolio over the last 12 months have been City Union Bank and Nuvama Wealth.

Against this uncertainty, we continue to be cautious on valuation, preferring to let our cash buffer cushion any drawdowns and to deploy only where price and value line up. Over a longer horizon, we stay constructive on the export side of the portfolio: the recently concluded FTAs, a competitive rupee and India’s manufacturing competitiveness make a strong case for our exporters, which now account for roughly half the portfolio allocations. On balance, we think both the LCP and RGP portfolios are well-positioned to navigate the near-term noise while retaining meaningful upside as the export opportunity plays out.

What worked and what didn’t?

On the stock-wise attribution front, the best performers over the last three months were Pearl Global, Uniparts and Pricol, all of which rerated on the back of healthy 1QFY27 results. The main detractors were CMS Info Systems, Go Digit and Eris Lifesciences.

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