By Bharath Rajeswaran
BENGALURU (Reuters) – Hopes of a normal monsoon and a likely thrust from India’s next government to address the stress in the bottom of the market are likely to spur consumption-linked themes for the rest of 2024, a fund manager at Ambit Asset Management said.
“Irrespective of whichever government comes to power after election results on June 4, we are already seeing a trend that is favourable for rural-facing companies or those catering to the bottom end of the market,” Siddharth Bothra, fund manager at the flagship Ambit Coffee Can Fund, said on Wednesday.
“They are ripe for revival.”
A widening wealth gap has led to a “K-shaped” recovery in India’s consumption, with the premium and urban side of the market benefitting from demand for discretionary products like jewellery, while the bottom end of the market has lagged, Bothra says.
“The new government’s likely focus is to take measures to address the stress in the rural and bottom of the market.”
Ambit Asset manages assets worth over 27 billion rupees (about $324 million).
Moreover, the monsoon rains arriving a few days earlier than expected have also boosted the prospects of bumper harvests that could accelerate rural demand and consumption recovery.
Bothra expects telecom companies, two-wheeler makers and sellers of consumer staples to benefit the most.
“If those at the bottom end of the pyramid upgrade from using feature phones and 2G-phones to 3G-, 4G- and 5G-phones and their data usage rises, it will benefit telecom companies,” said Bothra.
“The two-wheeler sales are still lesser than what it was in 2019. You have so many great quality companies which have solid fundamentals; they will greatly gain from consumption recovery.”
Companies selling premium products such as cars, high-end electronics and jewellery have outperformed the market but fast-moving consumer goods (FMCG) firms like Hindustan Unilever and Dabur have trailed in comparison.
A pick-up in rural consumption could turn that around, said Bothra.
($1 = 83.2690 Indian rupees)
(Reporting by Bharath Rajeswaran in Mumbai; Editing by Savio D’Souza)
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