Macquarie Joins Bulls on India Consumer Stocks as Demand Revives

(Bloomberg) -- Buying Indian consumer stocks could prove rewarding as the government starts to spend more in the villages to boost farm incomes before next year's elections, according to Macquarie Capital Securities (India) Pvt.

The rural economy is recovering after two straights years of good rainfall and an increase in crop prices, analyst Amit Sinha wrote in a note. Macquarie joins a growing chorus of bulls on consumer staples and branded goods as demand picks up after disruptions caused by the cash ban in late 2016 and the roll out of a nationwide sales tax last July.

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Even so, Macquarie's isn't a blanket recommendation on the sector. It has stuck to just five companies -- Hindustan Unilever Ltd., Godrej Consumer Products Ltd., Titan Co., Jubilant Foodworks Ltd. and Bajaj Corp. -- while reminding investors that a “rising tide may not lift all boats.”

The increase in size of India's formal economy after the cash ban and the new sales tax coupled with the recent hike in wages of government staff is lifting sales at automakers, jewelry firms and restaurants, the brokerage said.

To contact the reporter on this story: Ameya Karve in Mumbai at akarve@bloomberg.net.

To contact the editors responsible for this story: Divya Balji at dbalji1@bloomberg.net, Ravil Shirodkar

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