Tata Consumer, Bata, M&M Finance, HUL: stocks to buy ahead of Monsoon this year

Monsoon is round the corner and with the El-Nino effect, the rainy season is a bit delayed to enter India. However, the Indian Meteorological Department (IMD) said that the monsoon is very close to the southern tip and it will hit India in another 2-3 days.

India is an agriculture-driven country, whose about 60 per cent population is dependent on the primary sector. Monsoon is one of the major factors, which drives the Indian economy. Thus, monsoon is a major factor that impacts the performance of Indian equity markets.

The monsoon usually begins in June and drives rural consumption. However, if India faces lesser-than normal rains or drought, it would be a double whammy for the domestic economy.  It will not only impact rural consumption but also means that summers and heat will last longer in the major parts of the country.

IMD has predicted a normal monsoon this year, 96 per cent of long period average (LPA) with its arrival was expected by June 4, 2023 in Kerala. Onset of monsoon should be good for agriculture and important to drive the rural demand which will benefit sectors like agrochemicals, fertilizers and rural consumption stocks, said Motilal Oswal Financial Services.

The brokerage picked up M&M Finance, Tata Consumer Products, Finolex Pipes, Coromandel International and Bata India for aggressive traders for next 1-2 months with an upside potential of up to 12 per cent and traders can keep a stop loss of 6 per cent. "We have given equal weightage to all the 5 stocks at 20 per cent each as we feel all the stocks should benefit equally due to the monsoon," it said.

Not only the economy, a number of sectors and stocks including cement, agrochemicals, fertilizers, FMCG, and tractor players are directly related to these events. Consumer companies with higher rural salience are also likely to be at focus as the onset of monsoon progresses.

Another brokerage firm, KR Choksey has suggested picking Balkrishna Industries and Hindustan Unilever (HUL) from the segment with an upside potential of up to 15 per cent.

"Overall rural FMCG consumption returned to growth after 6 quarters of decline. Rural sales form 40 per cent of HUL’s total revenue. Any improvement in rural India will strongly benefit HUL. The macro environment is easing which will lead to rural growth coming back. India’s CPI inflation declined to CPI to 4.7 per cent in April 2023," it said with a buy rating on HUL.

Balkrishna Industries is engaged in the manufacture of safe, innovative and performance focused tires for over 30 years. Its tires cater to a range of specialist sectors, such as agriculture, construction, earthmoving, port and mining industries. It has a global customer base with distribution partners in over 160 countries on five continents, said KR Choksey with an 'accumulate' rating.

El Nino's triggering sub-par rains or deficit rain does not bode well for the Indian equity markets. However, India has come a long way to reduce its over dependence on the agrarian sector, but analysts believe that near-normal monsoon will be a good sign for the economy, particularly ahead of general elections next year.

The equity market continues to be attractive despite rich relative valuations largely due to strong earnings growth prospects and a swelling bid from both domestic and foreign investors, said Ridham Desai , Managing Director at Morgan Stanley India.

However, he has cited slower global growth, tight global liquidity, weather vagaries and their impact on farm output, potential worsening of state fiscal position and a resurgence in commodity prices as the key risks for the domestic equities. "The most important catalyst in 2H2023is the market’s view on the 2024 general election outcome," he said.


(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Business Today)

Also read: Wipro shares tank post approval of Rs 12,000 crore share buyback plan; offer price, record date & more

Also read: Adani Enterprises, Adani Wilmar, 6 other Adani shares gain as group repays loans worth $2.65 billion