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Two-wheeler stocks see buying on renewed optimism for rural demand recovery

The rain deficit has narrowed to 5 percent from 25 percent a few days ago. Normal monsoon rainfall is seen as critical for the revival of rural demand

Mumbai / June 21, 2022 / 12:11 PM IST
(Image: Reuters)

(Image: Reuters)

 
 
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Shares of two-wheeler companies were in demand on June 21 amid renewed optimism for recovery in demand as the southwest monsoon accelerated its progress after a delay.

The monsoon rain deficit has reduced to 5 percent of the long-term average as compared to 25 percent a few days ago, data available with the Indian Meteorological Department shows.

“This improvement is largely attributed to the east and the Northeast region, as the rest of India continues to witness deficient rainfall, albeit lower than in the previous weeks,” said brokerage firm Motilal Oswal Financial Services.

These June-September rains are vital for India as they water almost 50 percent of its farmland.  This is also the time for the sowing of rice, sugarcane, cotton and other summer crops.

Normal monsoon rainfall is seen as critical for the revival of rural demand, which has seen a sharp downturn over the past year due to the second wave of the COVID-19 pandemic, high inflation and stagnating income.

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Several fast-moving consumer goods companies had started flagging concerns over the slowdown in the rural economy over the past two quarters as consumers downtraded on purchases due to higher prices.

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For two-wheeler companies like Bajaj Auto, TVS Motor and Hero MotoCorp the rural market constitutes a large chunk of their revenues and volumes. In 2021-22, two-wheeler companies reported a double-digit decline in volumes given a rural slowdown, high cost of ownership and production challenges.

Edelweiss Securities’ Abneesh Roy believes that the reduction in rain deficit is positive for all consumer names as a normal rainfall will lead to demand revival in rural India.

Earlier in the session, shares of Bajaj Auto and Hero MotoCorp were largely driven by the covering of short positions in both stocks by traders, while those of TVS Motor saw the addition of long positions.

At 11.40 am, shares of Bajaj Auto were up 1 percent at Rs 3,650.8 on the National Stock Exchange, while those of Hero Moto were higher by 1.8 percent at Rs 2,497. Shares of TVS Motor were up 1.5 percent at Rs 741.60.

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Chiranjivi Chakraborty
first published: Jun 21, 2022 12:06 pm
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