Monsoon & trends of the Indian Stock Market

Monsoon & trends of the Indian Stock Market

An analysis of the relationship between monsoon performance and sales numbers since 1990-91, of key sectors that are traditionally believed to be monsoon-dependent, shows that the relationship between the two variables is not straightforward.

The "monsoon effect" does have an impact on demand for fertilisers and tractors, and to a lesser extent, two-wheelers and consumer durables. But sustained trends in monsoon performance appear to be more important than above- or below-normal rains in a single year. Two consecutive years of bountiful or deficient rain, invariably show up in the sales numbers for fertilisers and tractors. Monsoons also appear to have a strong delayed effect on two-wheeler sales, usually with a lag of one year.

The spatial distribution of the monsoon appears to wield a greater influence on sales growth rates, than does the absolute quantum of rainfall in a year.

Even in monsoon-dependent industries such as fertilisers, pesticides or tractors, investors should pay attention to company-specific factors such as target markets, product mix and dependence on domestic markets, for these could reduce the sensitivity of the financials to the `monsoon factor'.

Click the attached link for the current updated sattelite picture of the progress of the monsoons over the Indian subcontinent.

Indian Satellite Image showing Progress of Monsoon
Monsoon eludes half of India

Interesting article on the Monsoons progress over India

Surinder Sud in New Delhi | July 16, 2004

Business Standard

The metereological department says that the monsoons will soon revive and the country may still get normal rainfall, but nearly half of the country's 524 districts have received below normal monsoon showers, resulting in delayed planting and withering of sown crops in a vast tract.

Till July 7, the cumulative monsoon rainfall was deficient by over 20 per cent in 240 districts. These include 54 districts, which received only scanty rainfall, where crop sowing is either yet to begin or the earlier sown crops have withered away, requiring resowing.

The situation has not improved much since then even though the monsoon seems to be reviving slowly in the peninsular and central parts of the country.

Monsoons and India
Over 50 per cent of the districts in the tract stretching from Rajasthan to Uttar Pradesh and further to Madhya Pradesh remain in the deficient or scanty rainfall categories.

The states having vast rain-deficient tracts include Rajasthan, Madhya Pradesh, Andhra Pradesh, Maharashtra, Uttar Pradesh, Gujarat, Tamil Nadu and Karnataka.

Although the north-western area, including Punjab, Haryana and west Uttar Pradesh, also falls in the deficient category, the crop situation there is not bad, thanks to irrigation.

The whole of Rajasthan is suffering from water scarcity and the situation is reported to be serious in 22 of the 32 districts. In Gujarat, 12 of the 25 districts are in the rain deficient category. However, groundnut sowing is reported to be normal in the Saurashtra region of the state.

In Andhra Pradesh, 18 districts in the Telengana and Rayalaseema regions are rain deficient, though the monsoon has revived in the area in the last couple of days.

Among other peninsular states, deficiency has been reported from 10 of the total 27 districts of Karnataka and 17 of the 29 districts of Tamil Nadu.

The state-wise crop situation is currently being monitored by the All-India Coordinated Research Project on Agrometeorology situated at the Hyderabad-based Central Research Institute for Dryland Agriculture.

According to its latest report, Andhra Pradesh's farm scene is far from satisfactory. Although the rainfall received in the second week of June had enabled farmers to sow rainfed crops in some areas, the scenario changed subsequently due to the break in monsoon activity.

So far, coarse cereals have been planted only in 26 per cent of the area. Similarly, pulses sowing is only 28 per cent and that of oilseeds merely 18 per cent so far. Sugarcane sowing is reported to be around 70 per cent.

In Karnataka, the rainfall was normal in the beginning of the season, but it became elusive from June 18, in all the three regions of the state -- north-interior, south-interior and coastal Karnataka. As a result, while the area sown is above normal in 18 districts of the state, it is far below normal in the remaining nine districts.

On the whole, only 46 per cent of the targeted area has been planted so far. Withering of the sown crops has been reported from some parts of south and interior Karnataka due to moisture stress.

In Maharashtra, crop sowing has been adversely hit in the Vidharba region, notably in the districts of Akola, Amravati and Yavathmal. The situation in the Konkan division, too, is not good with paddy sowing being estimated at only 10 per cent.

The dryland crops of jowar, bajra and commercial crops like oilseeds and cotton, could not be sown till the end of June. Paddy sowing is reported to be poor, between 15 and 20 per cent, in many other regions, including Nasik, Pune, Aurangabad, Latur, and Nagpur.

However, the sowing of less water requiring crops, including coarse cereals, has been much better in these areas.

In Gujarat, most areas, barring the middle Gujarat region, have been experiencing scattered rainfall. As a result, most of the rainfed crops, including bajra, sorghum, maize, pigeonpea, pulses, cotton and fodder crops, have been sown on over half of the normal areas.

The sowing of the major oilseeds, notably groundnut and sesamum, has been completed in 85 to 95 per cent of the area. But castor sowing is very poor, less than 15 per cent.

However, in the middle Gujarat region, some of the planted crops have wilted because of lack of moisture and high temperature. Paddy nurseries in the Kheda districts are the worst hit. Resowing of crops may be needed in parts of this region.

In the north, Rajasthan is virtually on the verge of drought. Although land preparation operations could be possible due to early rains, crop sowing is yet to start in the entire western Rajasthan. Drought relief measures might be needed if it does not rain adequately by July 20.

In Haryana, most of the districts, except Faridabad, Gurgaon and Sirsa, have remained rain deficit in July. As much as 90 per cent deficiency has been recorded in areas like Bhiwani, Mahendragarh, Rewari, Jhajjar, Rohtak and Sonipat.

Consequently, all the unirrigated crops are at present displaying symptoms of moisture stress.

In Punjab, irrigation has helped in ensuring more or less normal stand of paddy, groundnut, sugarcane and cotton. The crops are still in the early vegetative phases.

In the east, the West Bengal farm scene remains largely satisfactory. Although some parts of both Gangetic and sub-Himalayan West Bengal had received below normal rainfall in June, the paucity was subsequently made up.

Therefore, the sowing of jute and Aus (autumn) paddy is almost normal. The transplanting of main kharif rice crop (Aman) has begun.

The situation in Chhattisgarh and Jharkhand is not too bad and farm operations are going on there.
Interesting article on the inter relationship between certain stocks & the monsoons

Why Dalal St does not want rains


NEW DELHI: Farmers across North India may be looking up at the skies with hope but punters on Dalal St want no rain.

Thats because inadequate rains will fuel demand for pump sets, PVC pipes and drip irrigation systems fetching companies high returns. Operators on the bourses are already betting on deficient rain and are lapping up shares of KSB Pumps, Kirloskar Brothers, Jain Irrigation, Bharat Bijlee and Finolex Industries faster than you can say rains.

These stocks are normally not highly traded but have seen a huge jump in turnover in the past few sessions. KSB pumps rallied 5.24% to close at Rs 110.50 on the NSE today. Kirloskar Oil Engines gained 1.05% at Rs 279.95 and Finolex Industries surged 3.67% to Rs 67.80. Bharat Bijlee was up 4% to Rs 950 on the BSE.

Though Jain Irrigation underperformed on the Nifty today and closed lower by 50 bps, traded volumes and price for the scrip have been on the rise over the last couple of weeks.

The stock has also gained due to the new governments increased emphasis on agriculture with a sharp focus on irrigation. Another indirect gainer could be the shipping sector.

If India imports foodgrain, though it may not be necessary, shipping companies would be directly benefited. Lack of domestic demand for two-wheelers, tractors, especially rural demand could mean that companies will export these products to other countries.

The shipping companies could also benefit, if these goods are shipped through Indian vessels. SCI, however, slipped marginally by 0.75% to Rs 116.15 on the NSE today. GE Shipping was only slightly higher by 0.28% to Rs 143.85.

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