New Delhi

Passengervehicle companies' shares offer a more favourable risk-reward profile than two-wheeler manufacturers as tightening rural credit conditions and growing stress in farm-dependent regions could weigh on demand for entry-level vehicles over the coming quarters, according to a report.

In a report by BofA, analysts turned more constructive on passenger vehicle makers than on two-wheeler manufacturers, citing rising risks from rural stress and tighter lending conditions that could weigh on vehicle demand in the coming quarters.

In a recent note, the brokerage said passenger vehicle demand is relatively insulated from financing pressures as buyers typically rely on banks for funding and carry lower loan repayment risks compared with rural-focused segments. While overall automobile demand remains healthy, BofA warned that uneven rainfall, declining reservoir levels, higher farm input costs and stretched affordability could dampen consumption trends in rural markets.