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Dabur, M&M among 5 stocks to gain from govt's rural focus, says Nomura

Nomura has kept the December 2018 target for the S&P BSE Sensex unchanged at 11,380 levels from their earlier forecast.

Puneet Wadhwa  |  New Delhi 

Markets, Stocks, BSE, NSE, SENSEX

Global brokerage and research house, Nomura, expects the to be held as per schedule in 2019. The government, it says, is likely to focus on rural and agricultural economy in the run-up to the event and highlights five stocks that are likely to gain in this backdrop.

“We expect the will be held in May 2019, as scheduled. We don’t expect early elections. The government will endeavour to implement the schemes and showcase the success to the electorate, in our view,” point out Saion Mukherjee, Neelotpal Sahu and Sanjay Kadam of in a co-authored report titled 'India Equity Strategy: Road to elections.'

Also Read: Nifty is once again trading at 2% premium to 5-year average P/E multiple

Nomura’s bottom-up assessment pegs the seat-count in range of 181 – 308 seats for the Bharatiya Janata Party / National Democratic Alliance (BJP/NDA). As a base case, they expect the BJP/to emerge as the single largest bloc and would have the best shot at forming the next government.

If the – led does assume power in 2019, sees policy continuation, which in turn, should help sustain market multiples. On the flip side, failure of the incumbent government to come to power implies formation of an unstable coalition government. This could adversely impact the implementation of policy reforms and important policy decision making initiated by the incumbent government, which could hurt market sentiment thereby limiting valuation multiples, says.

Also Read: Nomura sees Nifty at 11,380 by December 2018; HDFC Bank, RIL among top bets

Though their analysts expects the to remain choppy over the next few months, they have kept the December 2018 target for the unchanged at 11,380 levels from their earlier forecast.

“We are overweight on financials (particularly retail private banks and insurance), autos, oil and gas, infrastructure/construction and healthcare. We are underweight on IT, consumer staples and cement,” the report says.

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The following five stocks, it says, should benefit from the government’s focus on rural economy and infrastructure development.

Mahindra and Mahindra Financial Services: We like rural asset financiers among the NBFCs, given the cyclical tailwinds, both in terms of election-led pick-up in activity and two years of good monsoons

Hero Motocorp: has around 50 per cent of its two-wheeler volumes coming from low-per-capita-income states and stands to be a key beneficiary of any improvement in rural demand.

Crompton Greaves Consumer Electrical: CGCEL is a major player in fans (43 per cent of its FY17 revenues) While the urban segment is highly saturated, the rural penetration of fans is still low at 65 per cent. As part of its announced strategy, the company will focus on agricultural pumps as well.

Also Read: Emerging markets performance tied to oil price surge, says Nomura

India: has around 45 per cent of its domestic business revenues coming from rural markets, which continue to be deeply underpenetrated as far as staple products are concerned.

Mahindra and Mahindra: is likely to be a key beneficiary of a recovery in rural demand, in our view. is the leader in the tractor segment, where the growth outlook remains strong. The company had around 42.7 per cent market share in the segment in FY18, and it accounted for around 28 per cent of its FY18 revenues.

First Published: Tue, July 03 2018. 14:27 IST