Monsoons have come calling! The rains have finally arrived, giving us the much needed succor from the stifling heat. Most parts of India are yet to get rains but they have already knocked on the doors and that’s a great relief. The only hope and prayer – rains will be normal this year so that India can reap a rich bounty.
For us on Dalal Street, the change in every season is an opportunity. Summer meant all the heat beating stocks; winter meant all the warmers and monsoon in India means all around buying.
So assuming that we will have a normal monsoon, notwithstanding predictions from weather agencies, these are the sectors which are expected to do well. They are the ones who will reap a rich harvest and you too can, along with them.
A good monsoon creates positive perception about the economy among investors, including FIIs and being a largely consumption driven economy, more money in the hands of rural India directly means growth.
This is the biggest beneficiary of a normal monsoon. People say that money or no money, people do not stop buying soaps, shampoos and other stuff. But in the villages where income is so dependent on the farmland, people do stop buying or buy much less when the harvest is poor. Hindustan Unilever, Marico, Dabur, Jyothy Labs and Godrej Consumer Products will benefit the most. Even ready to eat snacks take off which is good news for ITC, Britannia, Nestle and GSK Consumer.
A good harvest directly boosts demand for two-wheelers first and then cars and tractors from rural India though this could be offset by slower demand from urban India if no growth impetus comes. Companies which will benefit the most are M&M, Swaraj Engines, VST Tillers, Escorts and two-wheeler companies like TVS, Bajaj and Hero Moto.
A normal monsoon means more land gets irrigated and tilled and that in turn means more demand for seeds and fertilisers. The beneficiaries will be Coromandel International, Chambal Fertilisers, GSFC, Deepak Fertilisers and Rashtriya Chemicals & Fertilizers.
With a good harvest and higher minimum support prices, farm income will go up. Thus when there is more acreage under cultivation and moods are optimistic, demand for agrochemicals automatically goes up. UPL and Rallis are the best in this sector. Excel Industries too has a loyal set of investor following.
Micro finance and NBFCs
It might seem a bit incongruous to talk about this sector in the current circumstances but when a farmer has a good harvest, celebrations and renovations happen and it is micro finance companies first and then NBFCs. Companies likely to benefit are Manappuram Finance, Muthoot Capital, Cholamandalam Invst, Muthoot Finance, Shriram City Union, Shriram Transport and Ujjivan Financial.
Over and above all this, one company which benefits the most is Bata India. With the rush to buy monsoon footwear, Bata is the go-to company for most urbanites. For Bata, this is the best quarter seasonally.
As monsoon comes calling, you now know which stocks to take shelter in. As we said earlier, hope the rains remain benevolent this year and bless India with a robust harvest.