Rural Consumption-Led Companies To Grow In 2024, Says InCred's Mrinal Singh
The Indian economy is set to become a $7 trillion economy in the next five years, Singh said.
Companies majorly catering to the rural economy are set to benefit from increased rural consumption starting 2024, aided by upcoming state and general elections, according to InCred Asset Management's Mrinal Singh.
"Calendar year 2024 belongs to the rural consumption," said Singh, chief executive officer and chief investment officer at InCred. "Clearly, that has been the lagging part of the economy. We've always seen that approaching election period, the government becomes a dominant player in the economy through spending via Minimum Support Price."
Terming rural growth as "real growth", Singh said that it contributes almost 60% plus of the volume across sectors and the "India growth story is about penetration and that is the unchartered place where goods and services haven't yet reached".
The Indian economy is set to become a $7 trillion economy in the next five years, Singh said. The growth will be led by infrastructure, housing and capex, he said.
The building materials sector will grow at least three times its current size in the next seven to 10 years, he said. "If the economy is going to double in the next 10 years, then there are sectors which might actually do far better than 5-8% growth."
Key Themes
While urban consumption has been a major factor in driving growth in the last five years, capex has lagged. "I think (in) the next 10 years, a lot of capex will happen," Singh said.
He is constructive on sectors like building materials, manufacturing-oriented consumable businesses, auto, cement, industrial consumables, power utilities and housing finance businesses.
There is going to be mean reversion into sectors like healthcare, which includes pharmaceuticals, diagnostics, hospitals and insurance businesses as well, according to Singh.
Mean reversion refers to a theory where after extreme price moves, asset prices return to normal or average levels.
As household income levels increase, entertainment, leisure and travel sectors are also likely to see an up-move, he said. "We don't have a great representation on education; otherwise, that's also a place where households will significantly spend," Singh said.
Government-led infrastructure like expressways and transport systems are also expected to expand in the next 10 years, he said.
