Shares of companies whose fortunes hinge on the hinterland got a new life today on good monsoon forecast by both government’s India Metrological Department as well as private rainfall forecast agency, Skymet, after two consecutive years of drought.
Above normal rainfall IMD predicts India to get 106 per cent rainfall of long-term average in 2016.
According to Skymet, monsoon 2016 is likely to be above the normal at 105 per cent of the LPA from June to September, with an error margin of plus/minus 4 per cent.
As a result, shares of select automobile (especially two- wheelers), fast moving consumer goods, agro-chemicals and fertiliser companies saw hectic buying activity on Tuesday. Escorts, VST Tillers Tractors, Dhanuka Agritech, Monsanto India, Chambal Fertilisers & Chemicals, M&M Financial Services, Coromandel International, UPL, Dabur India, Kaveri Seed Company, Hero MotoCorp, Rallis India, Marico, Britannia and Jain Irrigation Systems, among others, rose 1.85 to 10.53 per cent.
“Forecast of a good monsoon this year is a good sign of revival for the troubled agriculture sector. After two consecutive years of poor rainfall in many parts of the country, this news of good monsoon is cheering farmers. It will not only benefit agriculture and farmers but will also give a boost to India’s economy,” said RG Agarwal, Group Chairman, Dhanuka Agritech.
Pro-rural announcements On many occasions, IMD and Skymet have differed on their monsoon predictions. But this time, both are predicting above normal rainfall, raising expectation of good rainfall ahead. This along with pro-rural announcements in the Union Budget make the case for a sustainable rise in such stocks over the longer term.
However, monsoon has been having limited impact on a broader market performance during the monsoon season as well as for the whole year as domestic and global factors have also started impacting the stocks for quite sometime now
Despite drought situation in both 2015 and 2014, Nifty has behaved differently. While Nifty declined by 6 per cent during June to September period and 4 per cent for the calendar year 2015, it had gained 8 per cent and 31 per cent respectively in 2014.