FREE

MOSL: CONSUMER-Taking stock after the correction; HUVR and BRIT remain our top rural picks

Consumer: Taking stock after the correction; HUVR and BRIT remain our top rural picks

 

Maintaining our long-held view of rural consumption recovery

• Four quarters of rural growth recovery, momentum continues: As highlighted in our and , rural growth has been on an uptrend (after almost five subdued years) and outpacing urban growth for the past four quarters now. While rural growth has been gradual so far (1.3-1.5x urban growth in recent quarters), we expect it to pick up pace going forward (~2x urban growth – a feat achieved a few years ago).
• Multiple factors at play driving rural growth: Reduced GST rates on staples have come in as a significant consumption kicker in two phases (in Jul’17 and Nov’17), and importantly, continue supporting growth. FY19 may have disappointed with below-forecast rainfall after two good years, but the current impressive reservoir levels (higher than 10-year average and highest in the past four years) should keep rural demand healthy going forward. Moreover, the recent hike in the minimum support prices (MSPs) and the ongoing investments in rural India by the center and states (which could pick up further ahead of the crucial state elections this year and the general election next year) reinforce our confidence of stronger rural growth over the next few quarters. Rural wholesales, a major laggard previously, have also been strong since 1QFY19.