One theme that is currently doing well in India is the consumption theme. Both rural and urban consumption is picking up steam as the the vast, growing middle class wants and buys the good life whether it is cars, bikes, white goods, soaps, travel, beverages, tractors, food, and much more.
For companies operating in the consumption space, this means more avenues for expansion and business growth. For investors, banking on this theme can result in a better-than-average return profile in the coming years.
One such fund that is betting on the rural consumption theme is the Mahindra Rural Bharat Consumption Yojana Fund. This fund is open for subscription, and banks on the rural India theme.
BANKING ON THE RURAL THEME
India’s rural demand story is on a roll. More than 800 million people live in about six lakh villages with rising purchasing power, which means that the demand drivers are in place to run over a multi-year period. Demand for branded products and consumer durables such as televisions, refrigerators and air-conditioners are ever-expanding.
The government is taking steps to improve rural income through important agricultural reforms. The government has also introduced a crop insurance program for the benefit of farmers which has seen gross premiums rise to Rs 12,752 crore in FY18, as compared to Rs 9628 crore in FY17.
At the same time, the government is driving non-farm income to enable higher incomes in rural regions, which in turn will lead to an increase in demand. While it may seem like agriculture contributes just about 15 percent of the GDP, the rural economy is a big contributor to the India growth story at 46.9 percent. Besides, over the years, non-farm incomes have been increasing rapidly for the average farm. In 1970 26 percent of the incomes came from non-farm activity. In 2015, 68 percent of rural income comes from non-farm activity.
States have invested more than Rs 80,000 crore cumulatively on irrigation projects. The government allocation on MNREGA has increased from Rs 480 billion in FY18 to Rs 550 billion in FY19. The government has increased its allocation to the National Rural Livelihood Mission to Rs 57.5 billion from Rs 45 billion in FY 19.
On the group front, the Mahindra group prides itself in understanding the rural pulse. The world’s largest tractor brand by volumes comes from the Mahindra stable. At the same time, the group also has a prominent NBFC operating in rural India.
THE FUND
Mahindra Rural Bharat Consumption Yojana Fund is an open-ended fund that aims to provide long-term capital appreciation, which closes on 2nd November. It’s an open-ended fund which offers both dividend and growth option, and is open for lump-sum or SIP investments. The minimum investment in this fund is Rs 1,000.
The fund will invest 80-100 percent of its corpus in equity and equity-related investments with an exposure to rural India. It can also investment up to 20 percent of its fund in equity related instruments outside of the rural theme, and debt and money market.
Some sectors the fund will invest in includes the farm sector, rural infrastructure, financial services in rural areas such as micro-finance, tractor vehicle finance, and rural consumption sector.
The fund has exposures to the growing sectors and comes at an opportune time when markets are seeing a price correction thereby investors are getting stocks at a good entry prices. But experts opine that investors should have a longer investment horizon when considering investing in the fund.
