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August 02, 2018
|We are pleased to present to you our monthly market commentary and outlook for the forthcoming month. The ‘stockaxis’ Market Intelligence’ is a quick update on the markets for the month gone by and our view for the next month. Use our sharp and crisp synopsis to continue building your wealth!
While India’s rural areas house most of the country’s population, consumption in these areas is less than half compared to the country’s urban consumers. To give a thrust to rural consumption, the government has initiated various measures including minimum support price (MSP) for agricultural produce, implementing measures to improve crop yields, etc. The government recently announced an increase of 4-53% (24% on an average) in minimum support prices (MSP) for 14 summer crops, which indicates its resolve to support rural incomes. These price hikes are the result of the current government’s intent to offer farmers a minimum 50% margin on input costs with the eventual intent to double farmers’ incomes by 2022. Being an election year, the government will abide by its promises to provide as much support as possible to the rural sector, which forms a large vote bank.
The rural sector is already showing signs of a pick-up in consumption as a result of government measures combined with economic growth. Consumption of snacks, hair products, aspirational products (with growing access to the internet and mobile phones), etc. have increased. Through mediums such as the internet and regional television channels, rural consumers are gaining knowledge of products used by their urban counterparts and are demanding similar products at lower prices. Companies that are able to provide these aspirational products at suitable price points will see tremendous growth in revenues and bottomlines.
More than half the household budget in rural areas goes towards food and beverages. Increase in consumption will give a thrust to packaged foods and beverage companies.
With the government’s focus on ‘Housing for all’ by 2022, the rural sector will be the main beneficiary. Industries related to housing infrastructure will benefit from this initiative.
Rural consumers have increased their spends towards ‘Looking better’, which includes spends on apparel and footwear, personal care and jewellery. Of these, the apparel and footwear segment is expected to grow significantly given the fact that business is shifting from the unorganized market to the organized segment due to GST (Goods and Services Tax).
Improvement in rural infrastructure (roads, cellular towers, banks/NBFCs, etc.) will see higher demand for vehicles (cars, tractors, etc.), mobile phones, loans, bank accounts, etc.
Rural consumers are also demanding better education and healthcare facilities. In case of the education sector, both the private sector and government are increasingly using technology to improve the quality of education and reach a higher audience while offering courses at affordable prices. In case of healthcare, with the government proposing to take on a large part of the healthcare costs, rural consumers will have a higher amount of discretionary income to spend.
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