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MFs eye opportunities in govt's rural push
Published On , 13 Mar 2018 By ET Wealth
It was in 2006 when management guru C K Prahalad coined the term ‘Bottom of the Pyramid’ which pointed towards the billions of people disadvantaged at the socio-economic strata, where lies a huge opportunity for growth and development. With the government and a large number of companies targeting to bridge this socio-economic gap, mutual funds also see some opportunities for investors. There are several industries that have a strong rural focus and offer immense scope for growth. These companies also offer the chance for wealth creation in the long term.
INDUSTRIES TO GAIN MOST FROM RURAL PUSH
INFRASTRUCTURE: PHYSICAL AS WELL AS SOCIAL LIKE ROADS, RAILWAYS, EDUCATIONAL INSTITUTIONS, HEALTHCARE FACILITIES
TWO WHEELERS, PASSENGER CARS AND SUVS
FAST MOVING CONSUMER GOODS AND WHITE GOODS
TRACTORS AND AGRO EQUIPMENT
FERTILISERS AND PESTICIDES
CEMENT, STEEL AND CONSTRUCTION EQUIPMENT
Companies focussed on the rural sector expected to attract investor interest
Rural consumption, two wheelers, tractors, small cars expected to see good demand
With a series of state polls culminating into next year’s Lok Sabha elections, the government is expected to spend heavily to create rural jobs and to boost sagging agro prices
Rural infrastructure & construction, irrigation, fertilisers expected to attract investments
Better subsidy delivery mechanism for farmers, better price realization and improved crop insurance scheme expected
RESURGENCE OF RURAL INDIA
Lately, the basic thrust of the government has been to increase the disposable income in the rural sector. In other way, the government has been trying to put more money in the hands of the farmers.The decision to increase the minimum support price by up to 50% for some crops, encourage farmers to grow new crops, usage of high yield seeds for growing mustard, soya etc. so that India can meet most of its edible oil demand, compensating sugarcane farmers adequately, more mechanisation in the agri sector are all aimed at the same objective.
The idea is that if farmers have more income, their level of consumption will also increase which will lead to more demand for consumer durables as well as consumer non-durables. A successful implementation of the government’s Pradhan Mantri Awas Yojana – Gramin would lead to more consumption of electricity and gas. This in turn would lead to a chain of consumption demand in 5-7 years. So I believe in some years from now, the government’s rural push would be a game changer. And I won’t even be surprised if the urbanisation that we have seen in the last 20-25 years, starts reversing after a few years from now.
So I believe some part of an investor’s portfolio should be targeted at the resurgence of the rural India. However, since these are thematic funds and the market is at a high, investments should be spaced out over a year.
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