Series 68 – Our exposure to Rural Recovery as a Theme

Last week we have highlighted the reasons why we remain underweight in banking as a sector. The previous weeks we have also been writing some articles on Rural Recovery as a theme. You can click on this link to read more about this-  https://ituscapital.com/snippets/series-66-rural-recovery-trends-in-india/

The below chart highlights the last 5 years Capex Spending of the Government has significantly grown while the rural spending had slowed down. We assume that this might also be the reason why there were significant seat loss from the rural.

We believe that government might take corrective measures to decrease this divergence in capex and rural spending as they are many key states involved in the elections in the following months.  We are also seeing on the ground data that points towards rural recovery as a theme-

1. Mass consumption category like FMCG were impacted after the pandemic and positive commentary from FMCG companies are pointing us towards Rural Recovery- We are increasing our position on Rural based FMCG companies considering this trend.
2. Uptick in 2 Wheeler demand (including sub 125 category) is also pointing towards rural recovery- 50% over the 2W sales come from rural areas- We are also increasing positioning in 2Wheeler space.

We have detailed this in our quarterly review of our portfolio. The complete article is available in the link below –

ituscapital.com/articles/portfolio-review-4q-fy24/

We will come back with more interesting information on the portfolio and outlook on the market in the following weeks.