The Hindu Business Line : Delayed monsoon sends market players to fields

Kolkata, June 23 Delayed monsoon has forced equity analysts to take a hard look at the corporate numbers directly or indirectly dependent on rains in the countryside.

Monsoon and agriculture gain more importance now as the economic scenario does not generate enough confidence for the market.

For analysts, the monsoon and El Nino risks have revived memories of the sell-off caused by drought in 2002 (Sensex fell 10 per cent in six weeks to end-July). Most players noted with concern that countrywide rainfall in June has been 45 per cent deficient, with 28/36 Met divisions receiving below-long-term average rainfall.

Analysts of Emkay, who met farmers in Andhra Pradesh, Gujarat and Maharashtra, said in a note on Tuesday that majority of the farmers said the monsoon’s behaviour in the first week of July would be crucial for sowing of kharif crops.

The brokerage said it is still premature to conclude that the rural economy would suffer from the delay. According to Dipankar Mitra, economist at equity advisory Noble, if normal rainfall is delayed beyond early July, agriculture output, the economy as well as corporate earnings may be hit.

Ventura Commodities pointed out that agricultural performance above 3 per cent was critical to realise 6-6.5 per cent GDP growth and avoid spiralling inflation. Demand for goods and services from two-thirds of the population depends on agriculture.

Ventura said the IMD forecast of a 96 per cent (98 per cent last year) monsoon is enough to encourage farmers to sow.

According to CLSA, June and July account for 20 per cent and 50 per cent of sowing activity respectively.

It said that market’s wait would be until July, which contributes 35 per cent of rainfall. It asked investors to watch out for the updates on El Nino and trends in critical spatial distribution.

CLSA said auto, cement and FMCG sectors are vulnerable to poor monsoon. JP Morgan said staples, discretionary and telecom might under-perform if monsoon weakness persists.

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