Weak rural demand weighs on several large-cap stocks in 2021

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While Indian stock markets delivered handsome returns in 2021, many large-cap companies have not shown healthy performance.

Market participants believe that large-cap stocks are safe because they involve low risk and tend to produce stable returns over the long term.

Some of the stocks in this category are ITC, Hero MotoCorp, Bajaj Auto, HUL, and Maruti Suzuki.

Accordingly, disruptions in economic activity, particularly in rural areas, during the pandemic have hurt their businesses’ prospects as a high percentage of the demand for these businesses is generated from rural India.

“The economy as a whole rebounded well in 2021, while few sectors experienced turmoil after the second wave of Covid, which severely affected the rural economy,” said Mitul Shah, Head of Research – Institutional Desk at Reliance Securities.

“This resulted in lower consumption in the countryside in 2021 and companies with products geared towards the countryside like HUL, Hero MotoCorp, M&M, Maruti, etc. saw an impact on profitability. This led to their underperformance. “

According to IIFL Securities’ Anup Gupta, “There have been both supply and demand disruptions in the economy.”

“Sales of auto and consumer goods declined due to rising costs for metals and other raw materials.”

A surge in cooking oil prices has dented consumer goods markets as well, Gupta said.

Edible oil, especially palm oil, is widely used in the manufacture of consumer products.

In 2021, Hero Motocorp’s shares were down 22 percent, Bajaj Auto lost eight percent, HUL over two percent and Maruti Suzuki over five percent, while ITC shares rose just one percent, stock market data showed.

Notably, the domestic benchmark indices – Sensex and Nifty – rose over 20 percent over the same period.

–IANS

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(Only the headline and image of this report may have been revised by Business Standard staff; the rest of the content is automatically generated from a syndicated feed.)

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