INSUBCONTINENT EXCLUSIVE:
NEW DELHI: Then Skymet and now, IMD
India is going to have a normal monsoon this year
In its forecast released today, the India Meteorological Department (IMD) said it expects monsoon rains to hit Kerala coast by May 15 and
projected a normal monsoon for the third year in a row
The weather department sees monsoon at 97 per cent of long-term average and is expected to update its forecast by June.
The monsoon forecast
is a positive for Street, said marketmen, who believe a host of agri-consumption sectors would make news on Tuesday
The list may include companies from FMCG, farm equipment, consumer durables and two-wheeler players
It should mean that agri-commodities will not have inflationary impact, which should augur well for the market as the RBI may not raise
It would also boost consumption-led demand," said Sanjiv Bhasin of IIFL.
Earlier this month, private forecaster Skymet had said India was
expected to receive normal rainfall in the June-September monsoon season this year although parts of southern and northeastern India were at
Bhasin is upbeat on fertiliser and agrochemical stocks such as Chambal Fertilisers, Rallis India and UPL
Analysts noted that dealers have so far kept inventory of fertilisers and pesticides low, which should support volume growth in FY19
As far as farm equipment sector goes, only 40-45 per cent of agriculture is mechanised in India
And this is where experts see huge potential for higher tractor penetration, and by extension, this is good news for tractor makers, said
MM is a big listed player in this segment
Other than this, the monsoon forecast would be taken very positively by companies from FMCG, rural financing and consumer staples, said
Mayuresh Joshi, Fund Manager at Angel Broking
"We are lucky for having two consecutive normal monsoons
If this happens again in the third year, it will be a very strong and positive factor for all rural consumption or two wheeler segments or
NBFC companies because they are more dependent on the rural sector to be on a discretionary spending, where it will have a better delta on
earnings," Yogesh Mehta of Motilal Oswal Securities told ET Now.
JM Financial in a note suggested that despite the declining share of farm
income in rural India, agriculture continues to be one of the major drivers as farming still employs 50 per cent of the country’s labour
force.
"Farm income is of critical importance for any recovery in rural spending
Our recent visits across rural India point to a modest improvement in farm income after the current rabi harvest," it noted.
The brokerage
said a likely normal monsoon in 2018, an increase in MSP prices, improvement in crop procurement mechanisms and stable – if not increasing
– global agri-commodity prices could support a modest acceleration in farm income growth.
"We should have a healthy monsoon also this
year, rural consumption is poised to show a very strong recovery
I think that automobile as a segment and sector in spite of the rich valuations would continue to do well
Ancillary companies should also have good margin expansion because they have had a quarter on quarter pressure on raw material costs, which
they have effectively seamlessly passed on because of the pricing power," said Sanchita Mukherji at Blue Edge.
Higher acreage and yield on
the back of improved farmers’ sentiment coupled with recovery in farm income are likely to bolster growth in the agrochemicals business
for FY19, Elara Capital said in a note
Emkay Global has a positive view on Deepak Fertilisers and Coromandel in the fertiliser segment
In the agrochemical space, it bets on Insecticides India, PI Industries and UPL.
