The increase in minimum support price for rabi crops is expected to boost rural income helping companies like Mahindra & Mahindra, Hindustan Unilever, and Hero Honda Motors among others, Religare Institutional Research said.
After a favourable monsoon, the hike in minimum support price will boost India?s rising rural income and consumption levels that will aid varied sectors?auto, staples, financing, food processors and fertilisers.
?Key themes to play in agri consumption are Mahindra & Mahindra, Hero Honda Motors, Mahindra & Mahindra Financial Services in the discretionary space, and Hindustan Unilever, Dabur and Jyothy Laboratories among staples,? Manoj Singla and Tirthankar Patnaik wrote in a note to clients.
The government has increased the minimum support price or floor price for various rabi or winter crops ranging from 1.8% for wheat to 20% for pulses that comes into effect from next fiscal beginning April.
Hero Honda Motors, Mahindra & Mahindra and to some extent Maruti Suzuki will be major beneficiaries in the ?discretionary plays?, while Hindustan Unilever, Dabur India and Jyothy Laboratories in staples segment will look to take advantage from the rising rural income.
An improvement in asset quality is expected to aid finance companies like Mahindra & Mahindra Financial Services and public sector banks, while food processing companies like REI Agro and fertilisers such as Tata Chemicals and Rallis India would benefit indirectly, Religare said. However, Singla and Patnaik said the downside of increasing rural income is that food inflation ?is unlikely to go down in a hurry for now?.