Top 7 stocks that will benefit from above normal rains
Anticipation of healthy monsoon in 2016 boosted market sentiments as the broader market index NSE Nifty crossed the psychological level of 7,800 on Wednesday for the first time since January 6. The benchmark index BSE Sensex was also trading over 400 points up in morning trade.
Agri-related stocks on Tuesday have rallied on hopes of robust rains. Jain Irrigation shares advanced 6.13 per cent to Rs 63.15 on BSE on Tuesday. Similarly, Insecticides (India) surged 16.14 per cent to Rs 400.80 and Escorts over 10 per cent intraday.
Both, private as well as government weather forecaster predicted ‘above normal’ rains this year, which eased fears over farm and economic growth after two consecutive years of drought.
Market experts believe select stocks related to agriculture and rural economy can give good return to investors on good rains ahead. G Chokkalingam, founder, Equinomics Research & Advisory, said, “Stocks like Mahindra and Mahindra (M&M) and Coromandel International are looking good ahead of monsoon. Overall, I am bullish on Indian stock market and see Sensex above 30,000 by the end of December 2016.”
Coromandel International is engaged in fertilisers, specialty nutrients, crop protection and retail sales. Shares of the company soared 5.23 per cent to Rs 208.05 on Tuesday, whereas M&M gained 0.66 per cent to Rs 1,240.75.
According to Indian Meteorological Department (IMD), monsoon will be 106 per cent of the long period average (LPA). There is 94 per cent probability that monsoon will be normal to excess this year. Anything less than 90 per cent of the LPA is termed as a ‘deficient’ monsoon and 90-96 per cent of the LPA is considered ‘below normal’. Monsoon is considered as ‘normal’ if the LPA is between 96-104 per cent of the LPA. ‘Above normal’ monsoon is between 104-110 per cent of the LPA and anything beyond 110 per cent of the LPA is considered ‘excess’.
Skymet, a private weather forecasting agency, on Monday predicted ‘above normal’ Southwest monsoon this year. Above normal monsoon would augur well for the agriculture sector which is under stress due to two consecutive years of poor seasonal rainfall.
Prakash Diwan, market analyst, prakashdiwan.in, said, “Robust rains may benefit two-wheeler stocks, especially Hero MotoCorp. In tractors, I prefer Escorts and Swaraj Automotives over M&M. In the FMCG space which offer low-priced products like Dabur and Marico will also benefit. Overall, I think Nifty will cross 8,000 soon and touch 8,200 in the first week of May.”
Pankaj Pandey, head of research, ICICI Securities said, “Sectors such as agro-chemical, NBFCs that cater to rural markets, FMCG and consumer durables are expected to benefit from the monsoon forecast.”
Agriculture has strong links with industrial and services sectors, plus a direct bearing on rural economy and consumption meaning earning recovery will be seen in many of the companies. Aasif Hirani, director, Tradebulls said, “Not only does a good monsoon increase farm production, giving more money to farmers, it also keeps inflation in check by increasing the supply of food articles. This will help in lowering interest rate which will be beneficial to the economy and our market.”
-By Rahul Oberoi | The Financial Express – Wed 13 Apr, 2016