The Met department's forecast of a normal monsoon this year has come as manna from heaven for farmers as well as the government.
From the market viewpoint, a normal monsoon is seen as a feel-good. “Foodgrain production in FY18 is likely to have grown by 1 per cent and another season of favourable monsoon is likely to be positive for rural sentiment,” said Antique Stock Broking in a report.
Rains play a critical role in the scheme of things for the economy and fortunes of many sectors are linked to how it pans out across the country.
In its first-stage forecast on Monday, the Indian Meteorological Department (IMD) talked about a normal South-West monsoon for June-September. If it does come true, this will be the third straight year of normal rainfall.
The prediction matches private player Skymet's forecast too, suggesting that rains won't let India down this time around. The monsoon is expected in Kerala between May-end or June first week and is likely to cover the country in the next 45 days.
Global brokerage firm CLSA expects wages to pick up as a normal monsoon aids rural recovery. We drew up a list of stocks that may make a splash if rains follow the script.
Mahindra & Mahindra
CLSA raised its target price for Mahindra & Mahindra (M&M) to Rs 960, from Rs 910 earlier. The global brokerage firm added that rural demand outlook has improved with the normal monsoon forecast. “Big hike in government support prices for agri commodities on the anvil and launch of new MPV would boost utility vehicle segment volumes,” CLSA added.
Escorts
Jagannadham Thunuguntla of Centrum Broking in an interaction with ETNow said, “Escorts can be one of the ideas that can benefit from a normal monsoon. Already, the stock is a stellar performer and a lot of wealth has been created in the past. We believe that a lot of steam is still left in the company. If there is any correction at any point of time, probably Escorts can be a good idea one can keep on the radar.”
Escorts deals in agricultural tractors and construction equipment.
Chambal Fert, Rallis India, UPL
Sanjiv Bhasin of IIFL is upbeat on fertiliser and agrochemical stocks such as Chambal Fertilisers, Rallis India and UPL. Other market experts also noted that dealers have so far kept inventory of fertilisers and pesticides low, which should support volume growth in FY19. Chambal Fertilisers offers urea and di-ammonium phosphate (DAP) whereas UPL provides crop protection solutions. Rallis India is engaged in the business of manufacturing and marketing of agri inputs.
Nagarjuna Fertilizers and Chemicals
G Chokkalingam, founder, Equinomics Research and Advisory, expects that Nagarjuna Fertilizers as well as Mahindra & Mahindra would get a leg-up from normal rains. The company is engaged in the manufacturing and sale of urea.
ITC, PNB Housing Finance, Godrej Agrovet and Hero MotoCorp
Sanjeev Jain, AVP, Ashika Stock Broking, is swearing by two-wheeler maker Hero MotoCorp, ITC from FMCG, NBFC firm PNB Housing Finance and agribusiness player Godrej Agrovet. He believes that consumption demand as well as discretionary spendings will get a push if monsoon stays on its predicted path.
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