A research note by Emkay Global Financial Services Ltd says that falling farmgate prices are likely to affect the income of farmers, particularly since costs of farming remain high.
A file photo of farmers at a rural bank
The note says that with dwindling profits, limited policy support because of overstocking and high level of bad loans, the sector is likely to see headwinds.
The note points out: “The sectors that significantly outperformed on the rural steroid theme over the past 18 months are FMCG, auto (particularly two-wheelers and tractors) and agri input stocks.
Also see | Will the rural sector underperform? (PDF)
Hence, given our macro view of moderating rural exuberance, we believe that the significant outperformance of these sectors itself will weigh on their future performance.”
Graphics by Yogesh Kumar / Mint
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