Rural stocks to fare better in under-performing market: Report

Indian equity market is expected to "struggle" over the next few months, though stocks and sectors related to rural India might perform relatively better, says a report.

Global financial services major Bank of America Merrill Lynch (BofAML) expects Sensex to touch 32,000 by December this year, a downside from the current levels.

The report however noted that in an under-performing market, sectors exposed to rural India like two-wheelers, cement and consumer staples should do relatively better.

"Our December Sensex target of 32,000 still implies downside - but sectors exposed to rural India (two-wheelers, cement, staples) should do relatively better," BofAML said in the research note.

It said an increase in rural government expenditure is expected leading up to general elections in 2019, as this segment addresses a large number of voters.

Stocks focused on rural India may fare better as the government is likely to respond to any actual/perceived loss of political ground by increasing social/rural expenditure, it noted.

"Improved rural spending is expected to create better living standards for the rural population. This would result in improved rural consumption and demand," it noted.

As government continues to invest in housing schemes such as Pradhan Mantri Awaas Yojana Gramin, construction material demand in rural India is expected to grow.

The report noted that consumption of cement too was high in the third quarter of 2017-18 (October-December).

Most FMCG companies reported good volume growth across segments such as soap, shampoo, hair oil, etc. Within autos, two-wheelers witnessed a healthy volume growth.