Monsoon forecast may add to market pressure

Our Bureau Mumbai | Updated on June 21, 2011

Market experts are of the opinion that the downward revision of monsoon forecast may not have significant impact on markets, though it could cause some pressure.

The Indian Meteorological Department (IMD) has issued a statement that the monsoon may be below expectation.

“Quantitatively, monsoon season rainfall for the country as a whole is likely to be 95 per cent of the long period average with a model error of +/- 4 per cent. The long period average rainfall over the country as a whole for the period 1951-2000 is 89 cm. Monsoon would be 98 per cent of the long-period average,” the IMD said on April 19.

Mr Prakash Diwan, Head of Institutional Equity, Networth Stock Broking, said: “Hypothetically speaking, if the monsoon is below expectations, input or food prices may rise, leading to a sort of food inflation. However, the impact will be felt only once the monsoon is over. It also depends on the distribution and quantum of the monsoon. It is too early to judge the impact now.”

Global factors

Some brokers are of the opinion that the decline in the benchmark indices by 3-5 per cent is largely due to global factors rather than the monsoon.

While a good monsoon is beneficial to every economy, a slight dip in expectations could have an immediate impact on the markets.

“There will be an immediate market reaction to this announcement as fluctuations are based on sentiments. A conclusion can be drawn only in the end of July,” said Mr Gopal Agrawal, CIO, Mirae Asset

“As of now, it is not a panic situation,” said Mr Ramanathan K., CIO, ING Investment Management (India) Pvt Ltd.

“Although there may be some impact on the primary articles, the market will not be affected significantly.”

Published on June 21, 2011

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