Stock Exchange: Which sectors will benefit from monsoon 2024?

Every year, monsoon forecasts become an important aspect of stock and commodity market research. In April 2024, the IMD predicted that India was likely to receive above-average monsoon rainfall, which was estimated at 106% of the long-term average in 2024.

La Nina weather conditions are changing during the second phase of the current monsoon. However, rainfall in Uttarakhand and Himachal Pradesh is expected to be below normal.

The monsoon forecast is an important parameter for policymakers, affecting the inflation rate. The normal monsoon is good and favorable for most Indian states, allowing for more controlled inflation.

How does monsoon affect the Indian economy?

As we know, India is an agricultural economy. The country has a unique competitive advantage with the largest area of ​​arable land and is the second largest producer of wheat and rice. Most farmers still use the monsoon rains to grow food. If monsoon rainfall continues at normal levels as predicted by IMD, the supply of all agricultural commodities will not suffer any reduction. However, if rainfall is low, crop production and supply may be affected.

Most of India’s rural population is employed in the agricultural sector, which contributes largely to the country’s GDP growth. Market participants actively monitor monsoon rainfall to find opportunities in the stock market.

Monsoon directly affects the FMCG industry. The extraordinary monsoon will maintain the food supply, meeting consumer demand. Food price inflation will also remain low, and the profitability of FMCG companies will systematically increase.

Car companies that produce tractors also play a large role in agriculture. Tractors are one of the most widely used vehicles for crop production, so normal rainfall is likely to boost car sales.

The exceptional monsoons will also boost rural incomes and help increase rural demand in the country.

Will the above normal monsoon be positive for investors?

IMD forecasts confirm that 2024 will be a good year for farmers. If the forecasts come true, Indian stock markets may rise. Sectors such as FMCG, chemical and automotive can perform well. The demand for agricultural goods will eventually increase and the profitability of enterprises will increase.

The government’s focus on improving the agricultural sector and increasing rural incomes is driving economic growth. Share market participants look optimistic, and indices are close to their highest levels in history, providing confidence in further investments.

The results of the Lok Sabha elections are likely to determine the direction of the stock market in the next few months. The extraordinary monsoon will drive increases in market indices and individual sectors.

The Nifty FMCG index is in a consolidation phase, ranging between 52,500 and 56,000. The overall market sentiment is positive and an upward expansion is possible in the coming months.

The Nifty Auto index has already reached an all-time high. The highly bullish structure of the technical chart shows that investors are positive about the future prospects of the automotive sector.

Investors need to be careful before investing as the market indices are high. Any negative news could trigger a short-term correction, dragging the index down.

In summary, monsoon plays an important role in the entire agricultural sector in India. IMD’s monsoon forecast is positive and rainfall is expected to be above average. In the coming months, the main areas of interest will be the FMCG and automotive sectors.

Rural demand is likely to drive GDP growth. Long-term investors who are bullish on India will be able to invest in the coming months. A significant upward movement in the broader market indices may occur if the current ruling party is favored in the Lok Sabha elections.

Atul Parakh, CEO of Bigul