Increasing Incomes Benefit Consumer Companies

Consuming the consumption theme

According to a news report, the rise in importance of rural votes is expected to continue to attract investors towards the consumption theme. Brokerage firm UBS believes that stocks with rural exposure will continue to do well due to continued policy focus towards the rural and agriculture sector. Improving disposable income in rural areas in the medium-term bodes well for companies that derive sizeable revenues from the rural market. Foreign brokerage firm CLSA has also recommended rising weights in consumption plays.

In an interview, Ravi Dharamshi, fund manager with ValueQuest Investment Advisors, said that the Indian market is at the beginning of the consumption cycle and that consumer stocks had the potential to provide high returns over the next 5 years.

You can play the consumption theme by buying The Great Indian Middle Class smallcase. The smallcase includes companies that are expected to benefit from growth in consumption resulting from increased disposable income.

The smallcase has returned 34.35% over the previous year compared to Nifty returns of 12.38%.

EV ecosystem in the news again

The news around electric vehicle ecosystem continues this week as well! Catch up on last week’s news here.

As part of go-green 2022 roadmap, the Union Ministry of Home Affairs (MHA) is planning to switch to electric vehicles and replace diesel guzzling vehicles, including heavy trucks and buses. The Power Ministry has offered to supply electric cars to Central Government departments, which can either lease or purchase them.

The Central Government is planning to install an electric vehicle charging station at every three kilometers in the cities that have a population of over 10 lakh and at every 50 kilometers on national highways. Public sector undertakings in the energy sector such as NTPC, Power Grid Corp and Indian Oil Corp are likely to initiate the process to set up charging stations at several locations in identified cities. The government is considering providing subsidies to the PSUs for the roll out programme. Auto makers Tata Motors and Mahindra & Mahindra are also reportedly interested in setting up charging infrastructure for electric vehicles.

These companies are part of the Electric Mobility smallcase. Benefit from the growth of the electric vehicle ecosystem by buying the smallcase. The smallcase has returned 28.04% over the previous year compared to Nifty returns of 12.38%.

Markets down by nearly 2%

Rising crude prices, rising inflation and uncertainty around government formation in Karnataka pulled markets down this week. Nifty closed down 1.94% at 10,596.4 and Sensex closed down 1.93% at 34,848.3.