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Six stocks you can invest as monsoon progresses positively

A stronger economic outlook can lift sentiment in equity markets, particularly of firms that sell products in rural areas, including consumer goods and automobiles.

Rahul Oberoi   New Delhi     Last Updated: June 25, 2015  | 15:52 IST
6 stocks to invest in on robust monsoon

Initial sentiment on below-average monsoon seem to have been brushed aside by investors as the key benchmark indices BSE Sensex and NSE Nifty gained over 3 per cent in the past 10 trading sessions to June 24 supported by the monsoon covering more of the country.

Earlier, the India Meteorological Department (IMD) had predicted that because of El-Nino effect monsoon this year would not be quite effective. But the quantum of rainfall during June 1-22 period is 21 per cent above normal, according to IMD.

Monsoon rains from June to September are a key factor for global commodities markets as they influence output of various crops in India, which is among the world's leading producers and consumers of wheat, rice, sugar and edible oils. A good monsoon lifts domestic demand. While higher farm output increases the income of rural people, higher demand for goods and services boosts economic growth.

Also, inflation could ease because a better supply of crops would lead to lower prices and take the pressure off the government to step in with fiscal measures and extra subsidies.

Rohit Gadia, founder and chief executive officer, CapitalVia Global Research, says: "A stronger economic outlook can lift sentiment in equity markets, particularly of firms that sell products in rural areas, including consumer goods and automobiles. Progress in monsoon has already started indications of bringing relief to equity markets as the market has stabilised in past few sessions and a recovery seems to be in queue if the monsoon continues the same pace."

Below are some stocks that are likely to benefit with the progress of monsoon:

 

  • M&M Financial Services: A good monsoon is directly proportional to higher earnings for farmers. Purchase of tractors and personal vehicles will be in demand. As a result, the company's loan growth may rise as higher demand for cars and utility vehicles will lead to an increase in loan demand. On June 24, the share price of M&M Financial Services was at Rs 278.60.
  • NHPC: NHPC , incorporated in the year 1975 is a company operating in power sector. A good monsoon indicates higher water levels in reservoirs. This means more water is available for hydro-power projects, and thus helps generate more electricity increase in water availability thus monsoon can give a boost to this stock. It is trading at Rs 19.75 on BSE.
  • Kaveri Seed: A leader in the Indian hybrid seeds industry, more than 70 per cent of its revenue comes in the quarter ending June. A strong monsoon will not only boost sales for the quarter but also increase production of its commercial seeds. Kaveri Seed shares closed at Rs 786.65 on June 24.
  • Rallis India: A strong monsoon and farm output leads to an increase in agro-chemical consumption. The July-September quarter is typically the year's best for the company, a period in which it reports maximum annual sales. The scrip is trading at Rs 246.90 on BSE.
  • Rashtriya Chemicals and Fertilizers: The leading fertiliser maker may witness a rise in sales on good monsoon. Profitability may also increase. The share price of the company was at Rs 55.60 on June 24.
  • Mahindra and Mahindra: Forecast of a deficient monsoon by IMD and a somewhat late arrival in Kerala had cast a shadow on prospects for the tractor industry and companies dependant on the rural economy, such as Mahindra & Mahindra. However, a strong pick-up in the rainfall in large parts of the country and a 21 per cent higher-than-normal rainfall till date have raised hopes for the rural economy. The rural sentiment has been subdued over the past 15 months and an above average monsoon would be a much needed shot in the arm. Shares of Mahindra and Mahindra have gained 10 per cent in the past 10 sessions. Leading brokerage Sharekhan believes they can touch Rs 1,485 in the next few quarters. It was at Rs 1,303.35 on June 24.
(All stocks, except for Mahindra and Mahindra have been recommended by Capitalvia Global Research. Mahindra and Mahindra is recommended by Sharekhan)

 

 

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