Monsoon And Rural Economy & Stock Recommendations - Sep 2020 - Angel Broking

Mr. Jyoti Roy - DVP- Equity Strategist, Angel Broking Ltd

"While most of urban India has been struggling post the Covid-19 outbreak Rural India has been performing extremely well which was reflected in the Q1 GDP data with the agriculture sector reporting a growth of 3.4% YoY though GDP registered a de-growth of 23.9% YoY. Monsoon too has been good this year with rainfall till the 9th of September being 7% higher than normal while distribution has been good with no region reporting a very large deficit. Though rainfall in the North West of India has been 11% below normal so far with few of the subdivisions reporting a deficit of over 20%, we believe that it should not be a problem given that the deficits are not very large while the rest of India has either received normal or surplus rainfall.

We believe that a bumper Kharif season along with pent up demand and record procurement of food grain by the Government bodes well for the rural economy and allied sectors like Agrochemicals, two wheelers and tractors. In the two wheeler space, Hero Motocorp is our top pick with a target price of Rs. 3,422 as we expect greater demand for entry level two wheelers driven by increased preference for personal transportation in the aftermath of the Covid-19 crisis. In the tractor segment we have a buy rating on Swaraj Engine with a target of Rs. 1,892 as we expect demand to remain robust given rising disposable rural income."

Source : Equity Bulls

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