Farmers in Mundiya Kheda village, Rae Bareli district, Uttar Pradesh
Farmers in Mundiya Kheda village, Rae Bareli district, Uttar Pradesh | Representational image | Praveen Jain | ThePrint
Text Size:

Mumbai: Prime Minister Narendra Modi’s incentives, a migrant worker exodus from cities and forecasts for a normal monsoon are increasing the appeal of staples stocks tied to rural India.

Analysts at IDFC Securities Ltd., Centrum Broking Ltd. and Crisil Ltd. are betting that shares of rural-focused consumer staples companies can outperform those serving cities as the nation begins to ease a nationwide lockdown. They are confident even as India heads for its first full-year economic contraction in more than four decades. The rural economy accounts for about 45% of gross domestic product.

Their reasons for being bullish include the government’s 1.5 trillion rupees ($20 billion) package to help farmers and fishermen, its steps to boost the income of farmers and the timely onset of critical rains. In addition, thousands of migrant workers are looking to work from their home towns.

The companies that “have a higher exposure to rural markets will definitely grow faster,” said Shirish Pardeshi, analyst at Centrum Broking. The “migrant laborers who have returned to their villages will start working and earning there and the government is giving doles to farmers, this money will come back to the staples category,” he added.

“Rural is a huge tailwind this year,” said Rohit Dokania, an analyst at IDFC Securities. “The lockdown wasn’t as severe in rural India as it was in big cities. So the farmers could harvest crops,” he added.

For Dokania and Centrum’s Pardeshi, shares in Hindustan Unilever Ltd., Dabur India Ltd. and Britannia Industries Ltd. stand to benefit the most from a rise in spending and income in rural India. The three stocks have outperformed the nation’s benchmark equity gauge and the S&P BSE Fast Moving Consumer Goods Index this year.


Also read: India to see recession due to worsening consumption, investment demand: Monetary policy panel

We are deeply grateful to our readers & viewers for their time, trust and subscriptions.

Quality journalism is expensive and needs readers to pay for it. Your support will define our work and ThePrint’s future.

SUBSCRIBE NOW


Anuj Sethi, a director at Crisil Ltd. is also more optimistic about India’s villages than its towns. Rural India “will fare better than urban areas because of higher proportion of essential products consumed, government doles, eased restrictions on agricultural activities and likelihood of normal monsoon,” he wrote in a note.

 

Rural spending isn’t the only popular strategy focus. Analysts at IIFL securities Ltd. are rooting for underperformers to catch up with their stronger peers.

Sanjiv Bhasin, a strategist at IIFL Securities, favors ITC Ltd. and Godrej Consumer Products Ltd., both of which have underperformed the S&P BSE Fast Moving Consumer Goods Index this year. He said that the two stocks can surge 40% in next one year due to valuations and a change in their product mix.

“We’re seeing a lot of value in these two underperformers,” Bhasin said. “Their valuations are attractive. They’ve capitalized on masks, gloves and other necessities that emerged under this crisis. Their business composition has seen a change for the better in this pandemic,” he said.


Also read: These 5 Indian states are leading the economy to recovery after lockdown, study shows


 

Subscribe to our channels on YouTube & Telegram

News media is in a crisis & only you can fix it

You are reading this because you value good, intelligent and objective journalism. We thank you for your time and your trust.

You also know that the news media is facing an unprecedented crisis. It is likely that you are also hearing of the brutal layoffs and pay-cuts hitting the industry. There are many reasons why the media’s economics is broken. But a big one is that good people are not yet paying enough for good journalism.

We have a newsroom filled with talented young reporters. We also have the country’s most robust editing and fact-checking team, finest news photographers and video professionals. We are building India’s most ambitious and energetic news platform. And we aren’t even three yet.

At ThePrint, we invest in quality journalists. We pay them fairly and on time even in this difficult period. As you may have noticed, we do not flinch from spending whatever it takes to make sure our reporters reach where the story is. Our stellar coronavirus coverage is a good example. You can check some of it here.

This comes with a sizable cost. For us to continue bringing quality journalism, we need readers like you to pay for it. Because the advertising market is broken too.

If you think we deserve your support, do join us in this endeavour to strengthen fair, free, courageous, and questioning journalism, please click on the link below. Your support will define our journalism, and ThePrint’s future. It will take just a few seconds of your time.

Support Our Journalism

1 Comment Share Your Views

1 COMMENT

LEAVE A REPLY

Please enter your comment!
Please enter your name here