Hydropower companies, agrochemicals, fast-moving consumer goods, two-wheelers and tractors are among the sectors and segments that are expected to benefit from the above normal monsoon.
The southwest monsoon has arrived over Kerala coast and parts of northeast India a day earlier than forecasted by the India Meteorological Department.
The country is likely to see 'above normal' monsoon from June to September. The IMD has forecasted that quantitatively, the southwest monsoon seasonal rainfall over the country is likely to be 106% of the long period average, with a model error of plus minus 4%.
FMCG
Good rainfall bodes well for the FMCG sector as improved kharif harvests lead to higher farm incomes. A normal monsoon is likely to support rural economic recovery, benefiting such companies by boosting consumption in these areas.
In the FMCG space, stocks like Hindustan Unilever Ltd., ITC Ltd., Dabur India Ltd., Godrej Consumer Products Ltd., Tata Consumer Products Ltd. and Marico Ltd. could benefit.
FMCG goods (Photo by Ravi Sharma on Unsplash)
FMCG goods (Photo by Ravi Sharma on Unsplash)
Auto
The automobile sector has faced significant challenges in the last financial year, with tractor sales and entry-level two-wheeler and passenger-vehicle sales suffering due to weak demand.
However, a recovery in the rural economy and an improvement in the monsoon can boost sales in these segments. Key stocks to monitor include Hero MotoCorp., TVS Motor Co., Bajaj Auto Ltd. and Mahindra & Mahindra Ltd.
Hydropower
Hydropower companies primarily generate electricity from reservoirs and a favourable monsoon significantly enhances their capacity. Abundant rainfall ensures reservoirs are well-stocked, leading to increased hydroelectric power generation.
A good monsoon can lead to a potential surge in electricity production and stability in power supply from these sources. Some stocks that could benefit include NHPC Ltd., NTPC Ltd. and SJVN Ltd.
Hydro Power Plant. (Photo by Collab Media on Unsplash)
Hydro Power Plant. (Photo by Collab Media on Unsplash)
Agrochemicals
Good monsoon leads to increased usage of pesticides and herbicides and boosts the demand for fertilisers and seeds. Predictions of an above-normal monsoon certainly bodes well for manufacturers in the agrochemical sector.
Stocks to watch are PI Industries Ltd., Sumitomo Chemical India Ltd., Sharda Cropchem Ltd., Deepak Fertilizers & Petrochemicals Corp., UPL Ltd., Chambal Fertilizers & Chemicals Ltd., National Fertilizers Ltd., Rashtriya Chemicals & Fertilizers Ltd. stand to benefit.
Close view of spraying fertiiser in a field. (Photo: Godrej Agrovet website)
Close view of spraying fertiiser in a field. (Photo: Godrej Agrovet website)
Seed Companies
A good monsoon will lead to excellent crop yields, which will benefit seed companies.
Favourable weather conditions enhance agricultural productivity, driving demand for high-quality seeds and ensuring robust growth prospects for companies in this sector.
Some companies that could benefit include Kaveri Seed Co., Bombay Super Hybrid Seeds Ltd., Mangalam Seeds Ltd. and Rallis India Ltd.
How Monsoon Drives India's Economic Stability
Numerous ways in which rains impact the Indian economy include:
Agricultural Productivity: Adequate rainfall ensures healthy crop yields, which are crucial for the livelihoods of millions of farmers and agricultural labourers.
Rural Income: Good monsoon leads to higher farm production, resulting in increased income for rural households.
Food Security: Monsoon is essential for the production of staple crops like rice, wheat and pulses. Adequate rain helps maintain food security by ensuring a stable supply of these essential commodities.
Economic Multiplier Effect: Increased agricultural productivity and rural income have a multiplier effect on the economy. Higher rural spending stimulates demand for various goods and services, benefiting sectors such as manufacturing, retail and transportation.
Inflation Control: Good rain helps keep food prices stable by ensuring adequate crop production. This stability is crucial for controlling inflation as food prices constitute a significant portion of the consumer price index in India.
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