Newsletter August, 2025

The last three years have been particularly challenging for rural India, marked by wage stagnation, weak demand across sectors such as FMCG, retail, and two-wheelers, and the lingering effects of the COVID-19 pandemic. Reverse migration disrupted rural employment, and agricultural distress intensified as input costs (fertilizers, diesel, pesticides) surged. However, as we head into FY26, green shoots are emerging. A strong start to the monsoon season, a resurgence in rural wages (driven by easing inflation), and higher government spending are setting the stage for a broad-based rural recovery. Encouraging commentaries from companies in consumer discretionary, consumer staples, auto, apparel, agrochemical and consumer durable sectors further support this view. We have increased positions in FMCG, retail, consumer discretionary, 2Ws, agrochemicals, and affordable housing as we believe earnings growth across these sectors is likely to bounce back strongly.