Monsoon and stock market: Tata Consumer, Finolex Pipes among monsoon stocks that are attractive this season
The delayed monsoon in India could impact the country's economy, particularly the agricultural sector. However, the Indian Meteorology Department predicts a 'normal' monsoon, which would benefit agriculture and boost rural demand.
PremiumAs India's economy relies heavily on agriculture, its crictal to comprehend how monsoon impacts the nation's economy. The overall health of the agricultural sector has a bearing on how well-off the stock market will be. In case, if monsoon does not meet forecasts, it will undoubtedly have a sever effect on the country's economy.
Rural areas of the country provide a sizable share of the income for Indian companies. While some businesses, such as those selling seeds, agrochemicals, fertilisers, etc., are directly involved in the agriculture industry, other businesses, such as those in the fast-moving consumer goods (FMCG) and automotive sectors, indirectly profit from a healthy rural economy. Banking, non-bank financial institutions (NBFCs), and microfinance organisations are other sectors whose performance is influenced by the state of the rural economy.
In a recent report, Global brokerage, Barclays stated that the monsoon of 2023 made a delayed landing in India on June 8. However, a tardy arrival does not necessarily indicate that it will proceed poorly. More important variables will be the distribution of rainfall and the likely emergence of an El Niño.
On June 8, five days later than expected and about a week later than typical, the Indian Meteorology Department (IMD) formally declared the start of the monsoon. As a result, rainfall between June 1 and 8 was around 60% below average, which has slowed the start of the monsoon season. With the arrival of the monsoon rains, this number should begin to improve, according to the brokerage's assessment.
“The late arrival in itself is not a material development, as the monsoon’s arrival tends to vary year to year, and the onset is not indicative of the progress through the season. Geographical distribution of rainfall over the course of the next four months and effects of of a potential El Niño weather pattern will be closely watched for their effects on sowing, food production and inflation," said the brokerage in its report.
The global brokerage states in its report that the IMD maintained its expectation for a ‘normal’ monsoon and expected total rainfall to be 96% of the long-period average in its second long-range forecast.
Top 5 monsoon picks of Motilal Oswal Financial Services Ltd
Due to the monsoon's considerable influence on the Indian economy, its arrival is expected to be advantageous for agriculture and crucial in boosting rural demand, which will support agrochemicals, fertilisers, and rural consumer stocks.
Here are some stocks picked by domestic brokerage Motilal Oswal Financial Services Ltd, where investors stand to gain from a good monsoon. Let's look at the technical views.
Finolex Pipes: The brokerage stated that the stock is trading at the 20-week average and that it is finding support at the daily scale's 100 EMA, which is building momentum for higher levels.
Mahindra & Mahindra Financial Services Ltd: The brokerage said that the stock has formed a pole and flag pattern on the daily scale which has positive implications.
Tata Consumer: The stock has started a new upward trend and has retested the breakout zone on the weekly scale, signalling strength.
Coromandel International: With price trading above averages on a daily basis, it has found support at the 20-month average and is slowly moving higher.
Bata India: The price has set up a base in the lower zone and has been making higher highs during the past three months, indicating a good trend.
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