Time to buy ‘Rural’ theme?
Markets are trading near record highs and making a stock selection call right now becomes tough. But, there is one theme which most analysts’ see tremendous potential in the long-term and that is theme ‘rural’.
After three years of subdued rural consumption, there are now increasing signs of a pickup. There are catalysts which are in place to drive the awaited revival in rural demand.
“While two successive years of normal monsoon portend well for farm output, the combination of MSP hikes, direct benefit transfers, and farm loan waivers should drive up disposable incomes,” Motilal Oswal said in a report.
“Corporate commentary following the 2QFY18 results from B2C sectors like FMCG, Autos, Durables, and Retail reaffirms our view. Quite a few FMCG companies see rural growth outpacing or at least matching urban growth after many quarters,” it said.
Auto companies like Hero MotoCorp, M&M and Escorts also highlighted rural growth recovery. India Inc. expects the demand trends to strengthen as we move into 2HFY18.
“Our observation about rural economic pickup confirms the same. A good harvest in 2016 and 2017 season coupled with better MSPs has helped lessen the rural distress and pick up in rural consumption over last 2 years,” Arun Thukral, CEO, and MD, Axis Securities told Moneycontrol.
“The disbursals of 7th pay commission awards also helped the cause. Improvement in rural demand has positively impacted the sectors FMCG, Auto, consumer durables etc. This is very much evident from the volume numbers for FMCG or consumer durables and auto sales number for 2 wheelers/passenger vehicles,” he said.
Thukral further added that going forward, the rural economy is expected to fare well; the confidence emanates from the management commentaries about better H2FY18 vs H1FY18.
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