Thursday, 2 July 2015

Best Sectors and Stocks to Watch Due to Good Monsoons

Posted by RaviKumar Nama
The economy of India remains greatly dependent on the good monsoons.Especially, the impact of North-east monsoons is very high. In particular, semi-rural and rural consumption is largely driven by agriculture and that is driven by good monsoons. Not only the aggregate rain is important; but the timing too. This year, so far the monsoon has been one of the best in 15 years with 15% more rainfall than normal, according to the Indian Meteorological Bureau. They are also expecting good and normal rainfall in the coming months as well. Above average or normal monsoon rainfall has been characterized by rising rural prosperity and with India Inc progressively increasing its distribution footprint into rural India, we are expecting some sectors and stocks would largely benefit from the good monsoon. Investors can well take advantage of this bounty. Here are few sectors and stocks that would benefit from a good monsoon...


Best Sectors to Watch Due to Good Monsoons:

1. Automobile: 


The automobile sector is one of the biggest beneficiaries of good monsoons. During years of good monsoon , the demand for two-wheelers and low-cost four-wheelers and tractors also rises. Hence we can expect good bet from Automobile sector.
Stocks to watch: Hero Motocorp, Maruti Suzuki, Mahindra & Mahindra, VST Tillers & Tractors, Bajaj Auto, Swaraj Engines, Tata Motors, Rallis India

2. FMCG: 

Good monsoons improve Rural India's purchasing power and increases demand for FMCG sector stocks having rural penetration.
Stocks to watch: Dabur, Hindustan Unilever, Godrej, ITC, Britannia, GSK Consumer

3. Banking & Finance: 


Good monsoons will improve the rate of loan repayment which decreases the Banks' NPA. With higher disposable income in the hands of rural consumers, the deposits would also increases from the rural. Banks which are having rural penetration would benefit more.
Stocks to watch: SBI, PNB, HDFC Bank, ICICI Bank, Axis Bank, Corporation Bank

4. Chemicals & Fertilisers: 


A good and normal monsoon usually increases the demand for fertilizers. Demand for Chemicals and Fertilizers would increase from rural areas which increases the sales and profits for good fertilizer companies.
Stocks to watch: Coromandel International, Chambal Fertilizers & Chemicals, Deepak Fertilizers and Rashtriya Chemicals & Fertilizers.

5. Cement:


Good monsoons results in picking up the construction activities in semi-urban and rural areas. This situation makes demand for cement. Can bet on good cement companies during good monsoon period.
Stocks to watch: ACC, Gujarat Ambuja Cement, Indian Cement, UltraTech Cement, Jaypee Cement, Ramco Cement, Shree Cement.


Conclusion:

Agriculture makes 17 per cent of the GDP. It employs (or partially employs) two-thirds of the workforce, which depends to some extent on agriculture for earnings. So, If monsoon performance is indeed trending towards the normal, this will offer a useful boost to country's economic growth, undoubtedly.

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