Kotak Nifty India Tourism Index Fund

India is a breathtaking melting pot of multiple cultures. Our country has a rich heritage, both ancient and contemporary. No wonder, India has long been a captivating destination for travelers from around the world.

But in recent years, the country's tourism sector has seen a remarkable surge. Not only is the world discovering the cultural beauty of India, but Indians are also becoming voracious travelers, backpacking their way across their own country and even the world. This is largely driven by stellar economic growth, rapid infrastructure development, an increase in disposable incomes, and the changing lifestyle preferences of Indians, both young and old.

We decode the intricacies of the Indian tourism industry, existing trends, and why this sector makes for an investment opportunity you'd be hard-pressed to miss!

The Rise of Indian Tourism

Right now, the tourism industry in India is experiencing a significant upswing, with more people choosing to explore all that our subcontinent has to offer. According to recent data, there has been a 25% uptick in the number of people who are opting for three or more trips per year, as compared to pre-COVID levels. This trend is particularly pronounced among millennials and Gen Z travelers, 75% of whom prefer to spend their disposable income on travel experiences, rather than material goods.

India's appeal as a tourist destination is wider than just domestic travelers. The country is also increasingly attracting international visitors, with 48% of foreign tourists choosing India for leisure and recreation. This influx of domestic and international tourists is reshaping India’s tourism landscape, not to mention contributing significantly to India's economy.

(*Source: India Travel Trends, MakemyTrip *(2023 vs 2019) & Outlook Traveller, June 2024 I IBEF Report, May 2024 . As per the latest available data)

Factors Driving the Tourism Boom

The ongoing surge is a combination of several key factors, that have, and continue to, reshape the dynamics of India's tourism industry:

1. Growing Middle Class and Increased Disposable Income

India's burgeoning middle class is playing a crucial role in fueling this tourism boom. Projections indicate that the middle class is expected to double by 2046-47, roughly about 25 years from now, and will make up for 61% of India's population.

Between FY2020 and FY2023, Indians saw a 36% rise in their disposable incomes. As more and more Indians find themselves with the means to travel, domestic tourism is flourishing, and outbound tourism is also on the rise.

2. Infrastructure Development

The Indian government has also made significant strides in improving the country's transportation infrastructure, making it easier for tourists to access destinations that were previously thought unreachable.

Data suggests that in recent years, India has seen the addition of 400 new regional air routes, the construction of 35,000 km of highways, and the laying of 3,000 new railway tracks. These improvements have enhanced connectivity between major cities and opened up newer cities and towns for people to explore.

3. Post-Pandemic Travel Trends

The COVID-19 pandemic, while initially devastating for the tourism industry, has paradoxically acted as a catalyst for the industry. As people emerged from lockdowns, there was a noticeable surge in domestic travel, or ‘vengeance travel’ as is commonly called. Staycation bookings increased by 30%. Additionally, the rise of remote work has given birth to the "workcation" trend, with bookings for these work-and-leisure trips growing by 25%.

4. Digitalization of the Travel Industry

The digital revolution has transformed the way people plan and book their travels. India's online travel market is projected to reach $28 billion by 2029, mirroring the growing comfort of Indian consumers with digital platforms. Currently, 40% of hotel bookings in India are made online, a trend that is only expected to grow in the coming years.

(Source: PRICE Report, July 2023, PIB. As per the latest data available I PIB, 2023 I Mordor Intelligence I India Travel Trends)

5. Diverse Segments of Indian Tourism

India's tourism industry is as multifaceted as the people it caters to, diverse in its interests and preferences. Some of the key segments driving growth include:

Pilgrimage Tourism

India's rich spiritual heritage makes it a prime destination for religious and pilgrimage tourism. The public is also willing, as demonstrated by the tourism euphoria around Ayodhya and Ram Mandir, inaugurated earlier this year. This segment is expected to grow at a Compound Annual Growth Rate (CAGR) of 16% until 2030, with projected revenue reaching $59 billion by 2028. The continued development of religious circuits and the improvement of facilities at pilgrimage sites are contributing to this growth.

Business Travel

As India's economy continues to expand and integrate closely with global markets, business travel is becoming an increasingly important segment. The business travel market is projected to grow at a CAGR of 7.6% & projected revenue of $76.30 Bn by 2032. The development of world-class convention centers and the growth of the MICE (Meetings, Incentives, Conferences, and Exhibitions) sector are driving this trend.

Medical Tourism

India has established itself as a leading destination for medical tourism across the globe, offering quality healthcare services at competitive prices. The medical tourism sector is expected to grow at a CAGR of 13% from 2024-29, with projections indicating that 7.3 million medical tourists will visit India by 2024. The combination of skilled medical professionals, state-of-the-art facilities, and cost-effective treatments makes India an attractive option for patients from around the world.

Experience and Adventure Tourism

As travelers increasingly seek unique and immersive experiences, India's adventure and experiential tourism sector is flourishing. This segment is expected to grow at a CAGR of 20% from 2021-28, with an expected revenue generation of $2 billion by 2028. From trekking in the Himalayas to wildlife safaris in national parks, India offers a plethora of options for adventure and nature enthusiasts.

(Source: India Business Travel Market Report I Mordor Intelligence I IBEF, 2024 I India Business Trade. The sector(s)/stock(s) mentioned above do not constitute any recommendation of the same and we may or may not have any future positions in the sector(s)/stock(s).)

Government Initiatives to Boost Tourism

Recognizing the potential of tourism as a driver of economic growth and employment, the Indian government has also proactively launched several initiatives to promote and develop the sector:

Incredible India Campaign

This flagship campaign aims to promote India as a must-visit destination, showcasing the country's diverse attractions to a global audience.

SAATHI (System for Assessment, Awareness & Training for Hospitality Industry)

This initiative focuses on improving the quality of services in the hospitality sector through assessment, training, and awareness programs.

Swadesh Darshan 2.0

This scheme aims to develop sustainable and responsible tourism destinations across India, focusing on themes such as spiritual circuits, heritage routes, and eco-tourism.

Lighthouse Tourism

India has a long and fascinating coastal line, which can serve as a great opportunity for tourism. With this in mind, the government plans to develop 65 lighthouses as tourist attractions.

Wellness Tourism and Staycations

Recognizing the rapidly growing demand for wellness-focused travel, the government is extending support to wellness tourism facilities as well.

Adventure and Cruise Tourism

Efforts are already underway to position India as a year-round destination for adventure tourism. The aim is to offer it all from paragliding in Bir, amidst the Himalayas to cruising in the sunny waters of Goa.

Sustainable Camping

Policies are being implemented to promote eco-friendly camping sites, encouraging sustainable tourism practices in remote areas.

These initiatives demonstrate the government's commitment to developing India's tourism sector sustainably and inclusively.

(Source: IBEF Report, May 2024. Pl refer these links for more details on the government initiatives –

https://sd2.tourism.gov.in/ 

https://saathi.qcin.org/ 

 https://www.incredibleindia.org/content/incredible-india-v2/en.html )

The Economic Impact of Tourism*

The exponential growth of tourism in India has far-reaching economic implications, benefiting a wide range of allied industries:

Transport Services: The increase in domestic and international travel will boost demand for air, rail, and road transportation services.

Travel Infrastructure: Hotels, resorts, and other accommodation providers will have to expand their capacities to meet the growing demand from tourists.

Leisure Services: Entertainment venues, theme parks, and cultural attractions will naturally see increased footfall as tourism grows.

Consumer Durables: The travel boom will push demand for luggage, travel accessories, and other related products.

The Nifty India Tourism Index

With so much on offer, it is only wise to make the most of this boom and capture the growth potential of the tourism sector. Keeping this in mind, the National Stock Exchange of India has introduced the Nifty India Tourism Index.

This index comprises 17 stocks across various segments of the tourism industry, from travel planning to hotels and resorts. The sector is expansive, and the index attempts to cover it all. To summarise the constituents are:

Plan: Easy Trip Planners Ltd, IRCTC, BLS International Services Ltd

Pack: Safari Industries (India) Ltd, VIP Industries Ltd

Embark: Interglobe Aviation Ltd, GMR Airports Infrastructure Ltd

Relax: Chalet Hotels Ltd, EIH Ltd, Indian Hotels co Ltd, Lemon Tree Hotels Ltd, Mahindra Holidays & Resorts India Ltd

Enjoy: Devyani International Ltd, Sapphire Foods India Ltd, Westlife Foodworld Ltd, Jubilant Foodworks Ltd, Restaurants Brands Asia Ltd

(*Source: Data as on 30st Aug 2024, NSE India.

The sector(s)/stock(s) mentioned above do not constitute any recommendation of the same and we may or may not have any future positions in the sector(s)/stock(s).

The above portfolio composition and statistics pertain to Nifty India Tourism Index. For detailed index methodology kindly visit www.niftyindices.com). The portfolio and its composition subject to change and the same positioned may or may not be sustained in future.)

About the Kotak Nifty India Tourism Index Fund

India’s leading asset management company Kotak Mutual Fund presents an opportunity for investors to invest in this  sector. The Kotak Nifty India Tourism Index Fund is an open ended scheme replicating or tracking the Nifty India Tourism Index. As the name suggests, it's an index fund which means it is a passively managed fund with relatively low management expenses. Investors need as little as Rs. 100 to invest in this scheme

The Kotak Nifty India Tourism Index Fund is an economical and convenient way to take part in the thriving Indian tourism sector.

Disclaimer:

The information contained in this (document) is extracted from different public sources/KMAMC internal research. All reasonable care has been taken to ensure that the information contained herein is not misleading or untrue at the time of publication. This is for the information of the person to whom it is provided without any liability whatsoever on the part of Kotak Mahindra Asset Management Co Ltd or any associated companies or any employee thereof. Investors should consult their financial advisors if in doubt about whether the product is suitable for them before investing.

The document includes statements/opinions which contain words or phrases such as "will", "believe", "expect" and similar expressions or variations of such expressions, that are forward looking statements. Actual results may differ materially from those suggested by the forward looking statements due to risk or uncertainties associated with the statements mentioned with respect to but not limited to exposure to market risks, general and exposure to market risks, general economic and political conditions in India and other countries globally, which have an impact on the services and/or investments, the monetary and interest policies of India, inflation, deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices etc.

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